UPI or Unified Payment Interface is a real-time quick payment system that helps in instantly transferring the funds between the two bank accounts through a mobile platform. It was developed by the National Payment Corporation of India (NPCI) in strategic collaboration with Reserve Bank of India (RBI) and the Indian Banks Association. UPI is very simple to use and all you need is a smartphone and UPI based application to send and receive money. Some popular Third-party UPI applications are PayTM, Google pay, PhonePe, Razorpay etc.
According to NPCI, Unified Payments Interface (UPI) based digital payments clocked 1218.77 million transactions worth ₹1.89 trillion in November, an increase of 6% transaction volume between October and November 2019.
Data source: National Payment Corporation of India (NPCI)
According to the August 2019 report from National Payment Corporation of India (NPCI), The market share of the UPI apps in India, Google pay has reached 59.75% of all UPI transactions logged in August 2019 followed by PhonePe touched 24.91% and Paytm’s 5.93%.
Image source: Razorpay
The new research conducted by Google Inc and Boston Consulting Group, India's digital payments sector will be worth $500 billion by 2020. This means the country will see $500 billion flowing through digital payments, which will contribute to 15 percent of the country’s GDP. India is transforming into a cashless payment to reduce corruption and fast transaction. The smartphone necessity of people will mark a new era in digital payments in India over the next few years that will account for digital payments exceed $500 billion by 2020 and non-cash transactions exceed cash transactions by 2023.
Features of UPI
The main feature of the UPI is its reliability. The problem is while using third-party gateway applications to transfer money online even the small fluctuation on the internet can create the loss of money. Despite these gateway apps offer excellent customer service and help customers get their money back, often the issues lie with the website or portal they are used on, and the same is not always possible. Since UPI runs on Immediate Payment Service (IMPS), the help service will be available real-time and 24x7 support.
The important feature of the UPI is an instant payment method to the beneficiaries. Customers can click the button to send the money to the merchant or any individuals within the fraction of seconds which is very helpful for the day-to-day activities like Ordering food online, buying grocery items and paying money to a friend. Due to two-way factor authentication, the payment process is simple and secure.
UPI has a special feature that we can send money to another bank account offline. Without smartphone and internet connectivity, Consumers can initiate the money transfer to the merchant through text messages. It out-turn to participate all kind of society in the digital platform. Many UPI based payment apps offer instructions in regional language to make application even simpler to all region of peoples.
How does UPI work?
UPI interface is based on the two-factor authentication system which means that with a single click the transaction process will authenticate at two levels. Only the consumer needs a mobile phone and the internet to initiate the transaction process. UPI takes a mobile number as identification. When you create your UPI account and get approved by the service provider, you must set a unique mobile pin (MPIN) and then it binds your device to your mobile number and needs to be redone every time you change your Smartphone. The provider will then assign a Virtual Payment Access (VPA) to the user. After a click, when the MPIN is matched with the VPA then the transaction process to kick off. Hence the consumer sensitive information is completely safe and secure with UPI.
Image source: NPCI
Methods to initiate the transaction process
The following various methods to initiative the UPI payment process such as
1. QR Code
By scanning the QR code displayed at various merchant stores or individual’s code and confirming the amount by entering the Mobile banking Personal Identification Number (MPIN) in your UPI payments app. From this method, the user can initiate the transaction.
2. Virtual Payment Address ID
Virtual Payment Address is known as VPA is something like an email-ID, which is given to an individual using the UPI service to send or receive money. With UPI, fund transfers can be easily done without IFSC code or bank account number. So, VPA is essential information required for all payment transactions.
3. Mobile Number
Using a mobile number, we can also initiate the transaction process by linking the mobile number to any Bank Account by sharing Mobile Money Identifier(MMID).
4. Sharing account Number & IFSC
The common method to transfer the payment process in between the different bank accounts using IFSC code and account number.
5. Audio NFC Technology
The contactless method is the most innovative method, for transferring money using Audio NFC Technology. Here, we do not have to share any VPA ID or Bank Account number or have to confirm any two factors authentication. Instead, an ultra-high-frequency sound wave (Near Field Communication sensor) communicates between the two UPI enabled devices (now available only in high-end smartphones) and matching the wavelength of two devices can authenticate the money transfer. Google Pay mobile payment app can also work using this method.
UPI Payments altogether is making India Go Cashless!