What Is UPI?
This guide will be your last destination of the Answer you’re hunting for regarding “What Is UPI?.” By RBI (Reserve Bank Of India), this new payment method called Unified Payment Interface or UPR. Before we move into the details, let me give you a brief snapshot of how the current payment transactions happen and why unified payment interface or UPI will be the game-changer. These are the various methods of payment transactions currently –
- ATM Card
- Debit Card
- Credit Card
- Online Banking
- Payment Wallets
with obvious cash leading the way in, especially retail transactions. Some estimates say that more than eight per cent of retail transactions happen in cash and these are all electronic-based methods.
So, if UPI becomes successful, it can make some of these methods of transactions redundant shortly. Nandan Nilekani has called this as a WhatsApp Movement of Banking Industry in India. Like WhatsApp disrupted the messaging business for telecom companies, Nilekani argued that the banking business in India will also be disrupted as payment will move to mobile and lending to algorithms.
For a very long time, bankers, regulators and political establishment have lamented the fact that India is a very cash-heavy economy, but things are going to change very soon. According to BCG and Google, digital transactions in India are going to increase 10 times by 2020 and it may overtake cash transactions by 2023.
These figures look insane considering the current situation but with UPI, things can change really very quickly. So, now what is UPI? Let’s discuss in details. UPI is the new boy in the payments market and has the makings of a blockbuster. It is an interface which basically serves three goals of RBI – Universal Electronic Payments, Less Cash Society and Financial Inclusion. UPI is easy, mobile-first, instantaneous, always available, interoperable, cheap, secure, reliable, open-source, both pull and push platform. UPI is going to make sending money and receiving money as easy as sending a text message.
Imagine a situation where a farmer sells his produce in the Mundy and gets paid by UPI. He immediately gets confirmation on his mobile and uses the same money to pay his daughter school fee pay his EMI and pay his electricity bill before leaving the Monday. UPI is a mobile-first interface, where most of the transactions will happen on mobile. And, therefore, 19 banks have already launched or are about to launch their UPI app on Google Play Store.
The list of these banks include – Andhra Bank, Axis Bank, Bank of Maharashtra, Bhartiya Mahila Bank, Canara Bank, Catholic Syrian Bank, DCB Bank, Federal Bank, ICICI Bank, TJSB Sahakari Bank, Oriental Bank of Commerce, Karnataka Bank, UCO Bank, Union Bank of India, United Bank of India, Punjab National Bank, South Indian Bank, Vijaya Bank and YES Bank.
In the long run, UPI may replace the current any FDR TDS and IMPS system. These systems need mandatory information of the recipient like Bank Account Details, IFSC Code, Account Number etc. But, with UPI, a unique ID of the recipient is required for an instant transfer at any time of the day. UPI based transactions are always available that is 24 by 7, including holidays you can do your money transactions within India or abroad. Another very important feature of UPI is interoperability.
A customer of Bank X can now download the UPI App of Bank Y and transact it. Boils down to who’s the app is better, the customer will choose that app and eventually be open for acquisition by that Bank. So, the real competition will be between the banks, which have the UPI platform transaction charges in UPI are pretty low. Currently, it is at 50 paise per transaction and it is bound to decrease as the number of transaction in the UPI system will read systems is very secure and reliable.
Security is foolproof and the transaction will happen in a highly encrypted format. Already, IMPS network on which UPI is built handles more than 8000 crores worth of transactions a day. Also, there will be two-factor authentication as mandated by RBI. One is virtual ID and the other is a mobile pin. It’s an open-source system, so basically, any vendor or company can register their identifiers on the UPI system and receive money from the customer’s bank account through the UPI.
So, it is expected that all the online and offline stores will register themselves on UPI shortly to receive funds and the least important feature is that it is both pull and push platform. Which means that you can send money as well as ask for money from a particular person. Other important points to note that are what kind of transactions happen in UPI, So, peer to peer fund transfer merchant payments can be done.
Remittances outside the country can be done as well as bail payments can be done and the scope will increase as the system matures. Is there any transaction limit? Yes, the transaction limit is rupee one lakh per transaction. There is so much excitement around UPI, why do you think everyone thinks that this will work? India has billion mobile connections, out of the 240 million smartphone users are there, which is expected to be more than double by 2020. There is large scale fibre optic network initiative being driven, both by the government as well as by the private sector.
The Pradhan Mantri Jan Dhan Yojana has made sure that everyone has access to banking. Debit and Credit Card penetration in India is decimal. Majorly due to lack of good banking system in small towns as well as higher cost of credit cards and debit card management by the banks in small terms in India. Debit Card is majorly being used as an ATM Card for withdrawals which clearly shows the dependence on cash transactions. So, these top six factors tell us that infrastructure is available as well as there are demand and need for such UPI system.
The next factor states that it will help in large savings for the banks, especially in ATM maintenance and paperwork. With UPI, the dependence on ATM will bound to decrease, which will help in saving cost for the banks as they are spending millions of dollars currently in managing more than 2 lakh ATMs in India. UK will make sure that more and more transactions become digital and which will reduce dependence on cash and also reduce the money printing bill of RBI (Reserve Bank of India).
Also, there will be a lesson, black money usage with the lesser cash transactions, so all these stakeholders will make sure that this system works as there are huge benefits for them. In the end, a very important question remains how UPI works?
How UPI (Unified Payment Interface) Works?
The UPI around the clock fund transfer service launched by RBI corner. We now know UPI is the most sophisticated public payments infrastructure in the world. And, is sent o become an efficient alternative to mobile wallets and make cashless payments faster, easier for millions of people in India.
So, now we will discuss how UPI works? We will first understand how to get started with UPI with the chart given by RBI. On the process of starting with UPI, trustees, the actual process is even simpler than depicted here and the overall process will not even take a minute. Before you can start transacting here, we have taken the scenario where here we have downloaded the app of Bank X.
Whereas our account is in Bank Y. First, you need to download any banks UPI app irrespective of you have an account or not from Google Play Store. It is not available on the Apple App Store and will take at least six months to list there. Once the app gets installed, it automatically registers your phone by sending an OTP, and the next step is you have to create your password for the app. So, this password will be required every time.
You open the app, one important thing to note here is that phone number on which you have installed this app should be same, registered with your bank account as well. Next step is to create your new virtual address, which will be like your new identity on UPI and this address will be unique to you. And should be shared with all the folks who want to transfer money to you. It will be in this format – examplename@axis. So, if you have now loaded, suppose Axis Banks app, then your unique ID will be yet near.
But, I would name this, you want to have, you can have at the rate access process of creating your virtual address is very simple. All you have to do is find where you can add your bank account, which will then open a screen with a drop-down menu of all the bank names. Once you select the bank name, where you have the account, which is bank via the app using your mobile will detect your account and ask you to create a virtual address. Next step is to set an MPIN. MPIN is a mobile pin, it is a second-level authentication in this UPI App. Many of you may already have a mobile pin if you have been using mobile banking.
If not, then you will have to initiate a send money transaction and then it will prompt you to set up the new M Pin. Always remember your M-Pin and never share your M Pin with anyone. So, now you are all set to start transacting using UPI. Now, what happens and how the process is different if we use our own bank’s app, where we have an account. So, the process is simpler. Two steps get reduced to one.
One is your app login password. Now you can use your own M Pin as your app login password, as well so you don’t have to remember two passwords. Second is, you don’t have to add your bank account as it will automatically get added, based on your registered mobile number. Now, we will discuss how to transact using UPI and we will start with how to send money.
Click on the send money tab, on your UPI app and then enter the virtual IP of the Mr B. B is the person whom you want to send money. To enter the amount, you want to send submit the app, will take you to PCI page where you have to enter your MPIN. And, all done, the amount will be transferred immediately to Mr B. You need to click on receive or collect money tab on your app. Enter the virtual ID of Mr. C, the person whom you want to receive money from. Enter the amount you want to receive. You can set a request validated time, so you can see that. This request is valid for 24 hours, 48 hours or till this date.
A validation message will go to Mr C. Mr C has to validate it and enter his M Pin and the transaction is done and you will receive money immediately. Few points to note on UPI working. So, UPI App will allow you to see your account history. All the transaction can be seen in the app itself. You can see your bank account balance, all the time, and in real-time. You can restore as many bank accounts as you have so if you have three different bank accounts, you can register all of them in one app and you can toggle between them for sending or receiving money. Each account will have its own virtual address apps.
Also, has dispute and complaint section, where if there is any problem with the app or any problem with the transaction, you can file a complaint on that currently. Many apps and eventually all the apps will allow transition through QR code and unique payment links. It means if you go for shopping and wants to pay through your UPI app, the merchants can create a dynamic QR code by asking your virtual ID. Which you can scan on your UPI App.
And, enter M Pin and the transaction can be done immediately. Similarly, if you are doing an online e-commerce transaction, you can select the UPI option. And, an e-commerce website will create a unique payment link. Which will take you to your UPI, where you just have to enter your M-Pin and your transaction will be done immediately. Aadhar based transaction may come soon as well.