UPI (Unified Payment Interface) – In Detail


India made advancement towards becoming a cashless economy with the introduction of the Unified Payment Interface (UPI). With this modern payment method, your smartphones will soon be enhanced by becoming a virtual debit card too and you can send or receive money instantly through it. With the help of Bharat QR code, it can help you get rid of your wallet altogether.

“For a long time, we have been claiming that we need a revolution in banking in India. I think we can assuredly say that now the revolution is upon us. What we have in India is the most advanced infrastructure of public payments in the world,” said by Rajan at the release of the UPI.

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Ever since it is introduced in Jan 2016, we consistently get questions like What UPI is, how does it work, how would it change my procedure of handling business payments, etc. In this article, we have answered all types of questions that can be raised related to UPI’s new payment method in detail.

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1) What Is UPI?

The Unified Payment Interface (UPI) can be considered as an email ID for your money. It will be a new way to get identified by your bank for the transfer of money and making payments by using the IMPS (Immediate Payments Service). IMPS is quicker than NEFT and enables you to transfer money instantly and it works 24×7unlike NEFT. This signifies that the online payments will become much simpler without needing a digital wallet or debit or credit card.

2) Who is behind UPI?

Unified Payment Interface is a vision that is initiated by National Payments Corporation of India’s (NPCI), structured with the assistance of the Indian Banks Association (IBA) and Reserve Bank of India (RBI). The NCPI runs the Rupay payments infrastructure such as MasterCard and Visa which permits different banks to transfer fundsandinterconnect. Also, IMPS (Immediate Payments Service) is an initiative of NCPI. UPI is the enhanced version of IMPS.

3) How Does UPI Work?

Earlier, if you want to make an online bank payment, you have to insert their account number, Bank name, account type, and IFSC code. Even if you have all these information, mentioning it all in, especially on a phone, is a painful procedure. Most banks take up to 12 hours to make the addition of a new payee and only then you can process the transfer.

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As per the NPCI, until now just 29 banks have accepted to start this service. If your bank is UPI-enabled, you can request it to connect you to the system. To start a transaction, you can utilize two types of address— local or global. The global address consists of your bank account numbers, aadhaar number, and mobile number. A local address can be a virtual address. For Instance, your bank offers you a virtual ID same as your email ID (such [email protected]). This virtual address will permit you to send and receive money from prepaid payment issuers and multiple banks. Because of that, you will no longer need to use an app for sending and receiving money.

4) What I can do with UPI?

UPI will make your online payments easier. Now, you need to use IMPS, NEFT or a digital wallet such as Paytm or MobiKwik for making an instant payment to the service providers. With the UPI, you just need to enter your information and get a billing request on your phone, which you can accept or reject at that time only.

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Taxi providers like Olander, food ordering services app like Zomato and Swiggy, online grocery shops like Grofers will be able to take benefit out of the UPI system. Such companies are able to register its identifier on the UPI system and get funds through the UPI from a customer’s bank account. Most of the same tech companies are now banking on mobile wallets. Aside from this, you can also send money to your family and friends immediately.

5) What will happen to mobile wallets?

Ever since UPI was introduced, most of the industry watchers use to ask this burning question. Mobile wallet companies were concerned and there is a reason behind it. The RBI has just permitted the banks to become Payment Service Providers of UPI service but the mobile wallets are out of the service. So, UPI has come as a bonus for banks which were not having a hold to mobile wallets like PayTM, Citrus Pay, Oxigen, Mobikwik, and Freecharge. Although mobile wallets want the banking regulator to include them as service providers, it has not yielded so far.

6) What about Payment Gateways?

In India, there are various payment gateways including EBS, CCAvenue, Instamojo and other gateways of payment. Work of these payment gateways is to combine payment methods such as debit cards, credit cards, net banking, and mobile wallets.

These payment gateways also provide detailed information on acquired payment (who paid & for what), aside from giving reconciliation, transaction management, insights etc. They also provide customization at each level (payment page, payment options, etc) which is beyond an easy movement of push-n-pull of money through UPI. Most precisely, Payment Gateways behave like a trusted custodian, one who offers protection against any conflict between consumer & merchant.

7) How much secure is UPI?

According to Nilekani, the security is fully trustworthy as the transaction will take place in an extremely encrypted format. Already IMPS network of NPCI manages more than Rs.8,000 crore transactions worth per day, which will epidemically rise with the use of mobile phones. Two Factors validation which is same as OTP will be there as its directed by RBI. In this situation, MPIN will be used rather than OTP.

8) Is UPI available now for everyone to use?

UPI was declared in Jan 2016 and made available to banks beginning 11 April 2016. Although, it is still in the initial stage and it will take little more time for banks to figure it out and add help for it in their mobile app.

“Some banks have gone introduced UPI officially out of 29 banks that had agreed to offer UPI service to their customers. We are confident that some banks will add UPI this year and the number will add further. Our attention is in line with the RBI’s perception of moving towards a ‘less-cash’ and more digital society,” AP Hota said, who is MD & CEO of NPCI.

Flipkart introduced PhonePe which is known to be working on a UPI mechanism, which is product based. Snapdeal already has FreeCharge in its wings and Amazon could form its move in the upcoming months. At ProfitBook, we are also setting groundworks to merge UPI soon with our software of accounting. In PhonPe you could simply transfer money to a friend making use of just your mobile number. Now, most of the banks have made their own UPI app.

9) What are the charges for using UPI?

NCPI has shown that they will impose Rs. 0.50 per transaction. On your bank statement, it will show as IMPS transaction.

10) Can UPI completely replace Cash or Cards?

As per estimation of RBI, the cash hanging in the system is up to 18% of the gross domestic product of the country, creating India as one of the most printed currency-dependent economies in the world.

The success of UPI relies on some factors. For instance, there are Aadhaar cards up to 760 million, and with 26 million Aadhaar card numbers adding every month, soon the total Aadhaar card provided will reach up to billion by next year. 120 million are smartphones, out of India’s 900 million mobile phones.

So, even though the use of smartphones is rising, it is not even near the levels of Aadhaar registration. In India, it is evaluated that there are over 25 million merchants and just 1.2 million have card readers. Yet a major amount of customers who don’t want to take risk hesitates to use cards.