Unified Payment Interface (UPI): Made Simple

India’s digital push through various mediums and reforms has taken the country in the direction of a cashless economy. One such digital advancement that has facilitated digital transactions the most is the UPI. The UPI full form is the Unified payments interface. This is a mode of payment where one can send money from the smartphone at any point in time from any place. In a way, you can say that your smartphone also acts as a virtual model of payment like a debit card. Another important fact is that you can use this app to send and receive funds in an instant.

The UPI app was launched in Jan 2016 and was adopted by only a handful of national banks initially. As of now, all banks operating in India have adopted and most of them even provide their version of the UPI app. It was piloted by the National Payments Corporation of India and launched by 21 member banks from Raghuram G. Rajan, then RBI governor. UPI’s target audience involves everybody that uses digital methods of transferring money. We look at the rise of UPI transactions in India and how they have become a critical factor in the country’s evolving cashless ecosystem.

With the UPI payment limit being Rs. 1 lakh, according to the reports, over 3 billion transactions took place in 2018 on UPI platforms, with 620 million transactions touching the Rs 1 lakh crore mark alone in December 2018. According to another report in January this year, the number of UPI transactions seen as pioneering in the digital payment system and a crucial factor in a cashless economy was around 1.09 trillion rupees.

The value of online financial transactions in India increased 10.5 percent between December 2019 and December 2020, the company said. A joint report by market research firm WorldPay states that 39.7% of India’s e-commerce payments in 2020 were made through digital wallets, with wallets becoming the country’s leading online payment method. According to data from EY, digital transactions based on UPI increased 110% in volume and 109% in value between June 2020 and June 2021. If current trends continue over the next few years, UPI’s contribution to the nation’s entire digital payments industry will increase significantly. The consistent rate of growth reflected in UPI payments could mean up to 18 percent of the country’s total target of 30 billion transactions is achieved in the coming years.

Unified Payment Interface:

A unified payment interface (UPI) is a smartphone application that allows users to transfer money between bank accounts. It is a single-window mobile payment system developed by the National Payments Corporation of India (NPCI). It eliminates the need to enter bank details or other sensitive information each time a customer initiates a transaction.

The system is said to be a safe and secure method of transferring money between two parties and eliminates the need to transact with physical cash or through the bank. The pilot system was launched in India on April 11, 2016. Banks across the country started to upload their interface in August 2016.

How does UPI work?

UPI has made the money transfer process a lot easier. You do not have to remember the receiver’s account number, account type, IFSC, and bank name. Instead, you can do the money transfer only by knowing their Aadhaar number, mobile phone number registered with the bank account, or UPI ID. You can set up a UPI ID on one of the apps that support UPI service. Mostly, a UPI ID begins with your mobile number followed by the ‘@’ symbol and ends with the app you are using. For example, if your mobile number is 90xxxxxx60 and if you are using the Paytm app, the UPI ID can be ‘90xxxxxx60@paytm’. The ID can be set up by providing the details of your bank account on the app. The app will send an OTP to your registered mobile number to make sure that you are an authorized person. Once you enter the OTP, you will be prompted to create a PIN for the UPI ID. Upon completing the registration, you can choose any mobile number from your contacts and send money. You can also request money from anyone on your contacts list.

What are the features and benefits of UPI?

• Online payments are simplified

• Pay for your hailing services, food delivery services, and shopping sites with UPI payments for instant fund transfer.

• Pay at the nearest restaurants, grocery stores, and departmental stores online.

• Rent, mobile recharge and utility bill payments can be done online instantly.

Benefits of UPI for banks:

• There is a universal application for one transaction.

• This is a single-click Two-factor authentication.

• It is safer and more secure.

• It enables easy transactions.

• Unique identifier.

• Payment basis single.

Benefits of UPI for Merchants:

• Easier fund collection

• There is no risk of storing the customer’s virtual address

• This is suitable for e-com and m-com transactions.

• Tap customers do not need credit/debit cards

• In-app payments (IAP)

• It resolves the hassle of cash on delivery.

Benefits for UPI for Customers:

• It is a single application for accessing various bank accounts

• There is round the clock availability

• You can easily raise a complaint from the mobile app directly.

• The use of virtual ID is secure.

Registration in UPI enabled Application:

Steps to Register:

• User downloads the UPI application from the App Store/Banks website.

• User creates his /her profile by entering details like name, virtual id, passwords, etc.

• User goes to the Add/Link/Manage Bank Account option and links the bank and account number with the virtual id.

Generating UPI- PIN:

• User selects the bank account from which He / She wants to initiate the transaction.

• User clicks one of the options.

Generate and Change M – PIN:

• You will get an OTP from the bank on your registered mobile number.

• You can enter the last 6 digits of your debit card number and the expiry date

• You should enter the OTP and your preferred numeric UPI PIN and click submit.

• Once you click submit, you will get a notification.

• You should enter your old UPI PIN and new UPI PIN and click submit.

Performing a UPI Transaction:

PUSH:

This is when you send money using a virtual address:

• You should log into the UPI application

• Once you log in, you can select Send Money/ Payment.

• Key in the beneficiary’s/payee virtual id, account to be debited, and amount

• You will see a confirmation on the screen

• Enter the UPI PIN

• You will get a message on the same.

PULL:

This is when you request money:

• You should log into the UPI application

• Once you log in, you can select Request Money/Payment

• Key in the beneficiary’s/ payee virtual id, account to be credited, and account

• You will see a confirmation on the screen

• Enter the UPI PIN.

• You will see a confirmation on the screen

• Enter the UPI PIN

• You will get a message on the same

• The payer will also get a notification for the request for money.

• The payer will click on the notification and review the payment

• He/ She can decide to accept or decline.

• If the payment is accepted the payer will enter the UPI PIN and authorize the transaction.

• The payer will get a successful or decline notification

• You will get a notification and SMS from the bank.

UPI Payment Example:

The Unified Payment Interface allows payments to be initiated by the payer, or by the payee. In the basic payee initiated flows, the payment request is routed by the initiating application through the NPCI switch to the payer for approval. However, in certain instances, where it is possible to connect with the payer immediately, it is preferred that the payee sends a payment request to the payer, who can then initiate the payment request with his credentials.

Example 1: seamless in-app payment within the same mobile of the user:

• Ashok is a student and uses a video application (MyStar) that allows buying an on-demand movie on his Android phone.

• He banks with DiBank (PSP in this case) and uses their mobile application for Android that has implemented UPI features.

• In the MyStar app, Ash ok wants to watch a movie for Rs.25.

• My Star application creates the UPI payment link as per this spec and launches the Android intent with all necessary parameters populated in the URL.

• Since the DiBank PSP app is registered to listen to UPI link/intent, it starts the app and takes Ashok straight to the pay screen with all values pre-populated from the link/intent.

• Ashok verifies the info on the screen and clicks pay to complete the payment.

Transaction Limits:

UPI is a flexible platform to make desirable transactions, there are specific transaction limits for a day. Most of the top banks in India follow the transaction limit of INR 1 Lakh for a transaction amount and a day. Whereas, the number of transactions initiated on the interface is around 20. Individual banks may prohibit sending more than INR 10,000 per transaction, while top banks such as ICICI, SBI, HDFC, and PNB permit a UPI user to send INR 1 Lakh per transaction. The maximum limit for a transaction on BHIM UPI is INR 10,000 per transaction and INR 20,000 in a day.

Conclusion:

India’s digital push through various mediums and reforms has taken the country in the direction of a cashless economy. One such digital advancement that has facilitated digital transactions the most is the UPI. The UPI full form is the Unified payments interface. This is a mode of payment where one can send money from the smartphone at any point in time from any place. In a way, you can say that your smartphone also acts as a virtual model of payment like a debit card. Another important fact is that you can use this app to send and receive funds in an instant.