UPI (UNIFIED PAYMENTS INTERFACE), an instant real time payment service is an innovation of India towards making Indian Economy cashless. Today we Indians do most of our big and small transactions through UPI apps. Not only in India, but our UPI services are also used in Bhutan, Nepal, Malaysia, Singapore, United Arab Emirates, France.
Till March 2011, only 6 non-cash transactions were being carried out per individual, 1 crore retailers were accepting card-based payments and 14.5 crore families have no access to any type of banking services, according to RBI data.
But as of July 2022, UPI transactions have crossed the remarkable 6 Bn mark.
The Making of UPI
In April 2009, with the objective of integrating the different payment mechanisms, National Payment Corporation of India (NPCI) was formed by RBI.
There was a large gap in online payments.As of March 2011 on an average only 6 noncash based transaction were being done by an individual. To fill this gap RBI released a vision statement for the next 4 years.
According to this vision statement, an authorized payment system which was safe, efficient, accessible, inclusive, interoperable, was to be developed. This was the part of Green Initiative aimed at reducing use of paper in Domestic Payment Market.
The pilot program, with 21 member banks, was launched on 11th April, 2016, by Dr.Raghuram G. Rajan, Governor, RBI, in Mumbai. Banks started to upload their UPI enabled Apps on Google Play store from 25th August, 2016 onwards and UPI was launched officially for Public use. After it was launched, UPI observed an exponential growth making India largest real time payment market.
After success of Indian UPI, Google suggested Federal Reserve Board of USA to develop a Real Time Payment System similar to Indian UPI. India has surpassed countries like China and South Korea in the field of Real time payment systems.
According to the Economic Intelligence Unit Report 2021, India has emerged as a global leader in UPI based transactions.
The need of Real time payment system
Earlier, if a customer has to transfer money to other person, he/she has to give direct instructions to debit the money and this instructions were either given through cheque or only through net banking / mobile banking.
How UPI works?
UPI act as a third party which can collect debit instructions from the user and submit it to the user’s bank account.For this NPCI developed a SECURED BACKEND SYSTEM which facilitate these transactions.
UPI has made the transactions simpler by removing the need of account number and IFSC code. Through UPI user can transfer money only by entering receiver’s virtual payment address (VPA). VPA is username and bank name combination.
This is Modern Mobile First System which doesn’t need any physical card. You only have to download a third party UPI app like Google pay, Phone pe, Paytm, Amazon pay and give access of UPI to your bank account.Now the mobile app can collect the debit instructions and submit it to your bank.
UPI transaction system is with Multi Layer Protection and have totally transformed the Indian Payment System.
The wonder of Interoperability feature of UPI
Interoperable means money can be transferred from one UPI app to different UPI app, for e.g. from Gpay to Phonepe.
This feature is offered only by few countries today and the countries have offered it in the online payment apps after the app was launched and became successful but in UPI, NPCI embedded the feature of interoperability from its very first launch.
Types of transactions that UPI supports
A. Financial transactions
Pay Request:
A Pay Request is a transaction where the initiating customer is pushing funds to the intended beneficiary. Payment Addresses include Mobile Number & MMID, Account Number & IFSC and Virtual ID.
Collect Request:
A Collect Request is a transaction where the customer is pulling funds from the intended remitter by using Virtual ID.
B. Non-financial transactions
1.Registration for mobile banking *
2.One Time Password (OTP) generation
3.Set/change PIN
4.Transaction status check
5.Raising disputes/queries
*Mobile banking registration is only possible if the mobile number (which is to be
registered) is already registered with the issuer bank for SMS /mobile alerts.
UPI can be accessed on all major platforms such as Android and iOS with apps
Unified Payments Interface (UPI) is a system that allows multiple bank accounts into a single mobile application., using this the user can transfer money from any bank account to any bank account like the money can be transferred from SBI to Bank of Maharashtra easily.
To know how to register for UPI follow the below link:
https://www.npci.org.in/what-we-do/upi/product-overview
What is UPI Lite?
Based on recent trends, it is estimated that a large number of future online transactions will be of low value below Rs. 200.
UPI Lite is a new pre-approved payment system that uses existing protocols to enable these low value transactions without placing transaction traffic loads on core banking systems in real-time.
Issuing banks can allocate a refillable ‘on-device stored value’ for their existing UPI app using customers who opt for UPI Lite.
As per current mandates, a ‘stored value’ balance limit of Rs. 2,000 is available, which the customer can use for offline transactions below Rs. 200 and replenish as necessary from a UPI linked bank account.
What is UPI 123 Pay?
UPI 123Pay : Call karo. Pay Karo.
UPI 123PAY is an instant payment system for feature phone users who can use UPI payment services in safe and secure manner without having internet connection.
This service uses an account number and phone number while utilizing Dual Tone Multi-Frequency (DTMF) signaling technology and follows the UPI two-factor authentication protocol for transactions.
Through UPI 123PAY, feature phone users will now be able to conduct transactions based on four technology alternatives.
These include :
1.Calling calling an IVR (interactive voice response) number: Call 080 4516 3666 / 6366 200 200 /080 4516 3581
This would require users to initiate a call from their feature phones to the numbers given above and complete UPI registration formalities to start UPI transactions without internet connection. This facility is available in multiple languages so the user can choose the preferred language.
2.App functionality in feature phones:
In this type, the interested solution providers will need to partner with the feature phone mobile manufacturers (OEM) to enable a native payment app. This UPI app look and feel is similar to smart phone based app, however with certain limitations of the feature phone. Currently it can offer majority UPI functionality except Scan and Pay. However developments are in progress to modify the app more.
Digital solution is an UPI app developed exclusively for feature phone by Gupshup with Airtel Payments Bank.
3.Missed call-based approach: Missed call-based approach will allow feature phone users to access their bank account and perform transactions by giving a missed call on the number displayed at the merchant’s place.
At the time of billing, the merchant will create a token with the customer’s mobile number and the bill amount of his purchase.
Customer can then give a missed call on the number prescribed by the merchant and immediately the customer will receive an incoming call from 08071 800 800 asking to authenticate the transaction by entering UPI PIN. This solution is developed by MissCallPay with Bank of India as the supporting bank.
4.Proximity sound-based payments:
This solution is the proximity sound-based payments which has been created in collaboration with Tonetag and supported by NSDL Payments Bank.
The technology uses sound waves to enable contactless, offline, and proximity data communication on any device.
User can tap any phone and make UPI payments to merchants using ToneTag’s VoiceSe payment solution. User calls the IVR number 6366 200 200 and chooses Pay to Merchant option. They tap their mobile phone on merchant device (POD), and press # once the POD emits the unique tone. The user then enters the amount to pay, followed by their UPI PIN to complete the transaction. The POD acknowledges the transaction status and the user receives a confirmation through the IVR call.
UPI for ASBA (IPO)
Customers can provide their UPI ID as a payment option while subscribing to IPOs on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
Credit card linked UPI
Credit card linked UPI is the new revolutionary step towards easing real time payments and improving ease of access in achieving the growth of economy.
Now one does not need to have funds in his/her bank account to access the facilities of UPI. Now one can link credit card to the UPI App and make the payments as per one’s needs.
Linking of credit cards to UPI was allowed by RBI in June 2022, and Punjab National bank, Union bank of India and Indian bank became the first three banks to launch the facility of linking UPI and credit cards.
Financial Inclusion through UPI
Payments through UPI apps are so simple, that in Country like India where digital literacy is very low, UPI has helped in increasing the financial inclusion process.
In order to access UPI app, a person just needs a UPI enabled bank account.