Unified Payment Interface (UPI) – WhatsApp Moment for Payment System in India

In a step to Revolutionize Indian Banking System, Dr.Raguram Rajan before bidding adieu has acquainted Indians to a new age banking in form of Unified Payment Interface (UPI) aka “WhatsApp Moment for payments in India”.

Unified Payment Interface is a brainchild of Rajan and is being developed by National Payments Corporation of India (NPCI) and Reserve Bank of India (RBI). UPI is aimed to move Indian Economy towards cashless economy and accelerate the financial inclusion program by enabling hassle-free peer-to-peer online transfers.

Let’s understand what Unified Payment Interface (UPI) is and how it will work.

What exactly is Unified Payment Interface?

Unified Payment Interface is a set of standard programming interfaces to aid seamless and instant transfer of money using cashless system. Using UPI you just need to have smartphone and your banking app to send or receive money instantly or to pay for your retail purchase.

Read: All You Want to Know About Payment Banks in India

Transaction using Unified Payment Interface involves three key parties:

1. Payment Service Providers (PSPs) to provide an interface to payer and payee to transact. Unlike wallets (Paytm, mobwiki etc.) which require payer and payee to use same PSP for transacting, UPI allows payer and payee to transact by using two different PSPs.
2. Banks to provide accounts to transact. Bank may be PSP sometimes.
3. National Payment Corporation of India (NPCI) which acts as an intermediary effecting credit and debit transactions through IMPS.

Getting Started with Unified Payment Interface

How Unified Payment Interface will work?

To use UPI you just need to open banking app or UPI app installed on your smartphone, enter the amount to be paid which can as low as Rs.50 or as high as Rs.1 lakh per transaction, enter the unique ID of the beneficiary and click send.

Beneficiary ID would be his/her mobile number suffixed by the bank in which he/she holds account. For example if beneficiary mobile number is 9876543210 and has account in BOB than the beneficiary ID would be 9876543219@BOB.

As soon as you hit send button, you will receive a confirmation code to your mobile phone which shall be used to authenticate the transaction. Once you approve the transfer, money gets instantly deducted from your account and transferred to the beneficiary’s bank account.

How is UPI different from NEFT/RTGS and IMPS?

Presently sending or receiving money is done either through NEFT, RTGS or IMPS system which requires mandatory information of the beneficiary like bank account number, IFSC code etc. UPI requires only mobile number and the name of the bank of the beneficiary for instant transfer of money.

With UPI you are no longer required to wait for hourly batches of NEFT or seek Money Mobile Money Identifier (MMID) code for IMPS transactions anymore to send or receive money. UPI enables transacting any time or day of the week 24/7 including holidays.

Read: NEFT and RTGS New Timings

Which banks are currently UPI enabled?

At present 19 banks namely – ICICI Bank, Andhra Bank, Oriental Bank of Commerce, Axis Bank, UCO Bank, Bank of Maharashtra, Punjab National Bank, Bhartiya Mahila Bank, TJSB Sahakari Bank, Canara Bank, Federal Bank, Catholic Syrian Bank, Karnataka Bank, DCB Bank, South Indian Bank, Union Bank of India, Vijaya Bank, United Bank of India and YES Bank have become the part of UPI and customers can download and use the UPI app from Google Play Store within 2-3 working days. More banks including State Bank of India (SBI) are expected to join the bandwagon soon.

Read: Maximise Mutual Fund Return through SIP

Are transactions done from UPI safe?

Unified Payment Interface is developed by NPCI keeping in mind all the securities protocols as per RBI regulations. It is based on the same platform as IMPS framework making transaction highly encrypted and fully secured from phishing, risk scoring, etc.

UPI works on a basis of single click dual authentication system which means that with one click the transaction gets authenticated at two levels. The user will need mobile phone with mobile PIN and the virtual ID offered by the payment service provider. With a single click the transaction is scanned and checked if the mobile PIN matches with the virtual address only then the transaction goes through.