UPI - India's payment revolution

A Build School product breakdown.

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing, and merchant payments into one hood.

NPCI conducted a pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their UPI-enabled Apps on the Google Play store from 25th August 2016 onwards.

UPI transactions are secured using UPI PINs which is a 4–6-digit numerical combination. In addition to that, the applications are highly encrypted and has a heavy bandwidth capacity

Power Of UPI

The Unified Payment System (UPI) is a common platform that links a bank account to a number of virtual payment address (VPA) very effectively. The result is that the money transfer becomes as easy as sending an SMS.

Money can be sent up to Rs 1 lakh to any bank account via one’s mobile phone without furnishing the details of debit/credit card, net banking, or wallet password or even without knowing the beneficiary’s account number!! This unique system of transferring money is called the Unified Payment Interface. (UPI)

This payment system is launched National Payments Corporation of India (NPCI) and is approved by the RBI. The beauty of this UPI app is that the user need not remember the 15-digit bank account number of the beneficiary or the 11-digit IFSC code of the beneficiary’s bank (used to identify bank branches).

Instead of providing the beneficiary's account details, the receiver can merely share a virtual address, which can be the sender’s name or phone number. Based on this, the sender transfers money.

The New Normal

the “New Normal” has brought many changes to our lives, whether it be social distancing, wearing masks, sanitizing every few minutes, or simply the way we interact with the world around us. One major change that Indians seem to have embraced is the way they transact, moving away from cash and towards digital payment options are Credit Cards, Debit Cards, Wallets, or UPI.

Indians are notoriously famous for being cash-biased & want to use cash to transact anywhere and everywhere. Despite having widespread digital payments options such as wallets and UPI payments, the shift away from cash has been slow-paced. Pandemic has made most people realise that cash has an inherent risk of germ transfer and should be avoided.

Digital Payments are safer and easier to use & reduce the risk factor for users. For the average user there is no additional charge on making a UPI transaction and is simpler to use than most other digital payment modes. Everything from an Auto Wala, to a chemist, from a roadside grocery vendor to a salon have a QR code. And you must commend the efforts made by UPI players to boost the acceptability of UPI. UPI allows users to make seamless, contactless payments and stay safe in these times.

There are many digital payment modes available in our country, they can be classified under 3 main categories: Net Banking, Cards (Credit & Debit cards), Wallets & UPI.

Before Vs After

If you compare the same situation with cards, not all shops have a POS machine and even if they do, they won’t let you use them for transactions less than a pre-defined amount (due to MDR charges), so you can’t just swipe your card for a Pepsi. And no Auto wala or a grocery vendor will ever have a POS machine. Compare the same thing with Net Banking and you must go through the painful process of adding a beneficiary, waiting for it to reflect & then make the Payment. When compared to wallets, there is no additional step of adding money to a wallet or have the acceptability issues that most wallets face.

UPI Payments are faster (require just 3 clicks), real-time (reflect instantly) & free (no MDR). You pay directly from your bank account and are completely secure as they abide by RBI’s 2-factor authentication mandate (device binding & UPI Pin)

Pandemic has managed to do what demonetization couldn’t. Make Indians embrace digital payments. People who used to swear by cash have embraced this new technology. Even maids, drivers & guards have started accepting salaries directly into their bank accounts by leveraging the power of UPI.