What is Unified Payment Interface (UPI)?

RBI launches UPI; money transfer now as simple as a text message

With the Unified Payment Interface, the customer will need only one app, instead of multiple ones. And she won’t have to reveal her bank details either. So, is it as hassle-free as it is hyped up to be? Read on.

The Reserve Bank of India launched the Unified Payment Interface today. Through this interface, it aims to make money transfers easier and hassle-free. As the name says it all, it will be a unified, go-to-place for transactions.

What is Unified Payment Interface (UPI)? It is a payment system that will allow you to use a mobile phone to make money transfers. A virtual debit card, if you will.
How can you make payments?
For starters, the customer needs to have a bank account to make payments. That done, she will need to download an app on her smartphone. She can start making payments. It is as simple as sending a text message.
How is it different from the apps that banks provide?
Every bank requires you to download its app. So, if you have two bank accounts, you will find yourself needing two apps on your smartphone. But, with this interface, the customer needs to dowloand only one app. The UPI interface will network all the banks together and make it possible for the customer to make her transactions using a single app.
Is it safe?
Very much so. The customer will be given a virtual ID and won’t have to disclose her bank details. Of course, she will have to authenticate her ID with a password.
Are there different kinds of IDs?
If it is an overseas transaction, you will be allowed to use your mobile or Aadhaar numbers as your ID. For local purposes, a virtual address will do.
How does it work?
If you buy a product from Flipkart using your smartphone, you will have to give your virtual address, and the company or merchant will request money from it. Once you key in your username and password – without having to go into your bank details – the transaction will have been made.

Unified payment interface a step towards a cashless economy

National Payments Corp of India’s endeavour is expected to make e-commerce transactions easier, will facilitate micropayments and person-to-person payments

RBI governor Raghuram Rajan says improved payment infra, along with the launch of differentiated banking models such as payment banks are part of a revolution in Indian banking. Photo: Bloomberg

Mumbai: India moved a step closer towards becoming a cashless economy with the launch of National Payments Corporation of India’s (NPCI’s) unified payment interface (UPI) on Monday.
UPI, which is expected to make e-commerce transactions easier, will also facilitate micropayments and person-to-person payments.
The system will allow customers to instantaneously transfer funds across different banks with the use of a single identifier which will act as a virtual address and eliminate the need to exchange sensitive information such as bank account numbers during a financial transaction.
As a start, 19 banks have partnered with NPCI, an umbrella organization for all retail payments systems, to offer services based on UPI.
UPI is one of many innovations taking place in the financial sector that will benefit the customer, said Reserve Bank of India governor Raghuram Rajan.
The introduction of UPI, in particular, is expected to have a significant impact on the ease of retail payments at a time when mobile banking is picking up.

In the September-December quarter, the value of mobile banking transactions surged 82% over the same period the previous year.
“There is collaboration in this revolution but there is also immense competition and the winner is the customer. We hope customer experience with developments like today’s improves tremendously and the ease of making payments, the ease of saving and the ease for buying financial products also improves tremendously,” said Rajan.
Rajan added that the improved payment infrastructure along with the launch of differentiated banking models such as payment banks are part of a “revolution” in Indian banking.
“What we have in India is the most sophisticated public payments infrastructure in the world. (But) It is not just the payments that are part of the revolution; it is a whole new set of banks that are coming in,” Rajan said at the launch of UPI.
The central bank granted in-principle approval to 11 payments banks and 10 small finance banks last year.
Payment banks will provide basic savings, deposit, payment and remittance services to people without access to the formal banking system. They will not be in the business of lending.
The small finance banks will offer basic banking services, accepting deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and entities in the unorganized sector.
The new banks and the initiatives of older private and state-owned banks have led to the revolution, Rajan said.
NPCI has been working on UPI since February 2015 under the guidance of Nandan Nilekani, co-founder of Infosys Ltd and former chairman of the Unique Identification Authority of India.
The new interface is built on the same infrastructure as the Immediate Payment Service (IMPS), which is currently used by banks for real-time transfer of cash. Though the transaction limit for IMPS is Rs.2 lakh per transaction, for UPI the limit has been set at Rs.1 lakh .
“Payments have evolved in different ways. You had a card system, mobile money, Internet e-wallets. But completely mobile interoperable person-to-person instant real time with push and pull really didn’t exist anywhere. So I think that is where this is a leapfrog,” Nilekani said at the launch.
Nilekani added that UPI takes the IMPS platform—on which about Rs.2.4 trillion of transactions are conducted annually—a step further. “IMPS did not have an easy debit capability. That is being addressed by this platform,” said Nilekani, adding that just as IMPS had scaled up quickly over the last five years and has nearly 50% share of the remittance market, UPI will soon become an important payment platform for all merchants.
With the platform going live, the onus now shifts to banks to market and communicate the benefits of using UPI to their customers. Over time, bankers see applications based on UPI becoming the norm.
“It is going to make small value payments more electronic. I think what UPI can do is bring next innovation such as e-payments on delivery,” said Chanda Kochhar, managing director and chief executive officer (CEO) of ICICI Bank Ltd. “I see this becoming really a preferred option for payment for both customers and the merchants.”
The real benefit of UPI will be in digitizing last-mile payments, said Sachin Bansal, co-founder, Flipkart.
“In a lot of ways, cash on delivery and wallets exists in the interim until we find the final version (of payments). We are hoping that UPI will solve the last-mile final gap and make our experience for users a magical one,” Bansal said.
Earlier this month, Flipkart acquired PhonePe Internet Pvt. Ltd, which is working on a UPI-based payments solution.
“PhonePe’s mission is to significantly improve the online and offline digital payments experience for millions of Indian customers. We are really excited to merge with Flipkart and get access to one of the largest consumer bases in the country, which will allow us to realize our vision at a much larger scale,” PhonePe CEO Sameer Nigam said on 1 April, when Flipkart announced it will buy the company.
“Payments has been one of the biggest hurdles for mass adoption of online shopping in India. UPI has the potential of transforming the entire payments ecosystem in the country,” Flipkart CEO Binny Bansal said on 1 April.
Shikha Sharma, managing director and CEO, Axis Bank Ltd, considers UPI the WhatsApp moment for payments in India.
“Just as Aadhaar has become the base for a lot of policy reform, I think UPI has the potential to dramatically change the payments landscape. The fact that you have a low-cost acquiring solution which is safe can dramatically propagate merchant acquiring across the country,” Sharma said.
The impact of UPI on electronic wallets is to be seen. Some people say it could mean the end for wallets—a transitory step between traditional payments mechanisms and a full-fledged digital one such as UPI—while others say it will simply make it easier to own and operate wallets.
Rajan sounded a note of caution as well and asked banking entities to improve grievance redressal systems and use technologies such as UPI to expand access to formal financial channels.
“Somewhere along this chain, a transaction may go wrong. We hope that happens rarely, but it could go wrong,” he warned, adding that NPCI should now work towards protecting the system from security breaches and fraudulent transactions.
Apart from this, the focus should also be towards bringing in those outside the payments universe and those without smartphones, added Rajan.

RBI to launch Unified Payment Interface on April 11

The Reserve Bank of India (RBI) April 11 will launch Unified Payment Interface (UPI), which will make money transfer as simple as sending a text message. In the first phase, which will start next week, 29 banks will operate the platform. It will be inter-operable across different banks and will allow instant payments.

RBI to launch Unified Payment Interface on April 11

The Reserve Bank of India (RBI) April 11 will launch Unified Payment Interface (UPI), which will make money transfer as simple as sending a text message. In the first phase, which will start next week, 29 banks will operate the platform. It will be inter-operable across different banks and will allow instant payments.

The Reserve Bank of India (RBI) April 11 will launch Unified Payment Interface (UPI), which will make money transfer as simple as sending a text message. In the first phase, which will start next week, 29 banks will operate the platform. It will be inter-operable across different banks and will allow instant payments.

This UPI method could change the micro-payment landscape in the country.

According to a report, 95 percent of consumer transactions in volume terms and 65 percent in value terms are in cash. This is much higher than the 40-50 percent transaction in volumes and 10-20% in value terms for advanced economies.

Therefore, the government and the Reserve Bank of India have been working on ways to reduce cash in the economy. Considering the number of smart phones in the country is estimated to go up from 150-200 million to 500 million, mobile money transfer is expected to get a boost.

Moreover, payments can be made by only knowing the mobile or Aadhaar number.

The platform will help eliminate the requirement of receiver's bank account, IFSC code

Mobile wallets beware, UPI is here

The demise of mobile wallets in India would be quite a shocker. What will happen to all the seamless payments to your taxi vendors and favourite sumptuous food deliveries?
The National Payment Corporation of India (NPCI), a primary body governing all retail payment systems in the country, may have some good news for you. Through launching their Unified Payments Interface (UPI), a customer is no longer required to give their personal credentials like account details, security pins.

On Saturday, NPCI also launched a hackathon for the developer community opening APIs to build on the UPI platform.

Demystifying the UPI

UPI with its mobile first payments design moves towards interoperable and instant payments. The interface allows customers to make payments through a single identifier like Aadhaar number or virtual address.
The core features will help understand the payment cycle.

1) It enables you to make payments using your mobile phone as the primary device for payments including person-to-person, person-to-businesses, and businesses-to-person with the ability to pay someone as well as ‘collect’ cash from someone.

2) The platform also allows you to use Aadhaar number, mobile number, and account number in a unified way, while not giving it away during the payment process. You could just create a ‘virtual payment addresses’ that are aliases to your bank accounts.

The virtual payment addresses doesn’t allow your security to be compromised when a certain merchant’s account is hacked, because their database will have only a list of virtual addresses. The payment addresses are denoted by ‘account@provider’ or userid@mypsp (i.e. tarush@icici).

Moreover, the platform also allows you to transfer funds using only Aadhaar number as your identifier, which really equips the rural demographic. Today, according to Nandan Nilekani, former Chairman UIDAI, there are 250 million Aadhaar payment bank accounts, making 1.2 billion transactions a year with around 77,000 micro ATMs in the country.

3) Another exciting feature is the ‘pay by’ date, which is made while making a collect request to others (person-to-person or entity-to-person), which allows payment requests to be ‘snoozed’ and paid later before expiry date without having to block the services.

4) It also allows multiple recurring payments similar to electronic cash payments (utilities, school fees, subscriptions, etc.) with a one-time secure authentication and rule based access. This could be useful for organisations while paying salaries.

5) UPI also equips Payment System Players (PSP), the banks in this case, through their mobile applications to allow paying from any account using any number of virtual addresses using credentials such as passwords, PINs, or biometrics (on mobile phone).

This means that one can create separate virtual addresses for separate tasks like bill payments, charity donations and be used as wallets with certain rules. For example, if a user donates to Akshay Patra every month, one can create a virtual address just with that.

6) UPI also makes the system fully interoperable across all payment system players without having silos and closed systems, making you transact from any bank.

Thus, with payment banks, newer PPIs, the platform has standardised the m-pin system for all banks, while combing the phone with it. However, all these entities need to be UPI compliant. Thus, you can now make payments if you’ve access to (single-identifiers) either – mobile numbers, Aadhaar authentication, and m-pin.

7) Lastly, the ability to make payments using 1-click 2-factor authentication all using just a personal phone without having any acquiring (swiping) devices or having any physical tokens.

Thus, if UPI is implemented it will work better on frictionless payments, without people having to transfer funds to wallets and being bound by rules. With better interoperability, UPI gives users the freedom to use their money, they want to without worrying them of security. Moreover, the ‘common library’ or landing page for payments as refered to NPCI is all in-app.  However, the features are also available on a website where a person can make a collection request.
Therefore, we foresee the extinction of an Indian mobile wallet.
Moreover,Nandan Nilekani, Chairman, Unique Identification Authority of India (UIDAI) and an Advisor to NPCI, believes that in order to create a massification system, one needs to reduce the on-boarding cost. Thus, in this case, UPI is a winner as only your mobile number needs to be registered with your UPI compliant bank. Further, he hopes that if RBI allows eKYC then users can open bank accounts too on the fly. 

Your Story take – Permutations and Combinations

It helps e-commerce players to seamlessly collect funds on Cash on Delivery, without risking customer’s account information. It also helps merchants tap customers without any cards. However, for customers it offers multiple utilities on cash on delivery, bill splitting, merchant payments, and remittances.
Moreover, UPI through offering a ‘collect’ feature, improves the entry barrier for startups and businesses, allowing even an individual to function as a businesses (by themselves) solving their problems of collecting money for services and products.
However, it could turn a little sour for wallet startups like Freecharge, Paytm, PayU, and Oxigen Wallet. This is because the regulations don’t allow wallet-to-wallet interoperability. For example, one cannot make transactions from a Mobikwik to a Paytm. This is applicable for semi-closed wallets like Vodafone’s m-pesa and Airtel Money. In order to operate on the platform, these startups might have to partner with the 15 odd banks that are partners with the platform. It doesn’t make things any easier for companies with payment bank licenses like Paytm since they don’t have their wallet registered under their payment bank.
While for Snapdeal it makes operations easier for e-commerce, for Freecharge (Snapdeal’s acquisition) it can make them vulnerable for an attack by new entrants working on the UPI platform. Freecharge Go did try to break the loop of interoperability by allowing customers to pay to all online merchants through a virtual prepaid card, however, the limitations of e-wallets exist.
Sharad Sharma, Co-founder, iSpirt, said during the launch “We need startups to realise that the existing infrastructure has not been given away. They can come onto the UPI platform through partnering with PSP banks. For wallets, this could be a beginning to build on a better platform dealing with the problem of cashless payments better.”
However, Karthik Vaidyanathan, Co-founder, Momoe, a mobile payments company, refutes saying that now for payment startups it becomes a sales process, where they have to pitch to partner banks. Moreover, with rights of APIs, even banks will take some time to figure out how they can leverage this technology.
But these partner banks to the UPI platform have their own wallets like SBI’s State Bank Buddy which now have suddenly got a boost of technology, giving them level field to compete with the private wallets.
Moreover, A. P. Hota gives hope that it is only a matter of months that wallets will also be included in the gamut of things by RBI. But we would say that why need a wallet in the first place.
Everything said, now with NPCI opening the API to developers for their hackathon it will be interesting to see how startups leverage the power of the platform.

The National Payments Corporation of India has launched the Unified Payment Interface (UPI), which experts say has the potential to revolutionise mobile payment system in the country.  NPCI is the umbrella organisation for all retail payment system in India.

The biggest benefit of Unified Payment Interface is that it will be a single app for accessing different bank accounts. And anyone using the interface for sending or receiving money from their mobile phones need not give their bank details to the other party.

Through UPI, a customer with a bank account is identified with an email-like virtual address.  The new platform also allows a customer to have multiple virtual addresses for multiple accounts in various banks.

For example, a customer can also decide to use his or her short name for the virtual address such as  XYZ@sbi or XYZ@icici. Since bank account details are not given in this virtual address, the customer can freely share the UPI financial address with others.

For example, if you want to receive or may payment through a particular bank account, you just have to give your virtual financial address (XYZ@sbi) to the other party. For making payment, once you authenticate the transaction through a secure PIN, the transaction it will be complete. You don't have to share your bank details.

The other benefits of this mobile payment mechanism include its round the clock availability and faster checkout.

The Unified Payment Interface is an advanced version of NPCI's Immediate Payment Service (IMPS) which is a 24X7 funds transfer service.

NPCI said 29 banks have agreed to join the platform.  Launching the new platform, RBI Governor Raghuram Rajan on Monday said that it will empower users to perform instant push and pull transactions seamlessly.