UPI Paradigm Shift An innovation made in India is now ready for the global stage -S Ravi | So Good News

Unified Payment Interface is a digital innovation with instant payment option developed locally by National Payments Corporation of India (NPCI) and launched in India in 2016.

NPCI is a not-for-profit initiative of the Reserve Bank of India (RBI) in collaboration with the Indian Banks Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007. as a large-scale infrastructure and platform for electronic payment and settlement systems with enormous opportunities for innovation. It also allows Fintech firms to integrate with it and offer value-added services.

UPI has provided Indians with a platform for real-time money transfers as well as an easy and efficient means of digitizing payment services. It works on top of Immediate Payment Services (IMPS) developed by NPCI for instant funds transfer. The system allows the user to manage multiple bank accounts with any participating bank to transfer funds and make payments to merchants through a single mobile application. The interface enables seamless flow of funds from various participants including payer/payee Payment Service Provider (PSP), sender/beneficiary bank, NPCI, user (bank account holder) and merchants.

UPI works using a technology process called Open API (Application Programming Interface). The starting point of the process is the creation of a UPI ‘handle’ of the bank account holder/user, also known as a Virtual Payment Address (VPA). VPA can be done in minutes and eliminates the risk of mentioning account/card, IFSC and other details in every transaction.

The only condition for creating a UPI handle is that the bank account must be linked to the mobile phone number. The next step is that the Payment Service Provider (PSP) takes care of the transaction between the sender and receiver. The transaction goes from the sender’s VPA to the recipient’s VPA linked to the primary bank account. Finally, the UPI software coordinates the movement of funds from the user/payer’s VPA to the target/recipient’s VPA and completes the transaction. This transaction differs from paying with a debit card or credit card because it does not include a merchant discount rate (MDR). MDR is the fee charged by the receiving bank to the merchant.

The popularity of UPI is evident as it is adopted by small roadside shops to big brands as well as small retailers to wholesalers.

The numbers speak for themselves. In the last 4 years, from October 2018 to September 2022, the number of UPI-enabled banks has increased from 128 to 358. And transaction volume increased from Rs 482 crore to Rs 6,781 crore and transactions increased from Rs 74,978 crore to Rs 11 crore. 16,438 mln. This is an important testament to the success and growth of the UPI story.

The main reason for this penetration is that UPI accepts small transactions like Rs. Incentives for merchants include no MDR payable to banks on card transactions and only one device is needed to complete a transaction on smartphones, thus simplifying the process.

UPI’s evolving ecosystem is also key to its success – availability of high-speed internet in many parts of the country, smartphone-powered technologies, cloud computing and modern software technologies that complete transactions in seconds. UPI transaction security depends on user authentication via mobile phone – there is a Mobile Personal Identification Number (MPIN) for the UPI app and another layer of security when you need to enter your bank’s online transaction PIN. as part of every UPI transaction. For example, if you block a mobile number due to theft, UPI transactions on that mobile number will also be blocked.

NPCI has introduced several new innovations in the last few years: Recurring payments for monthly bills, international payments, linking UPI with credit cards, 123pay that allows people who don’t have smartphones but have basic mobile phones to use UPI using missed calls, merchant-to-real-time transaction and more. allowing one-time payment by allowing you to generate a QR (quick response) code suitable for many features. A dynamic QR code increases security and reliability because there is no risk of someone breaking a static QR code. The merchant generates a QR code specific to the transaction amount and the customer pays through UPI by scanning the QR code.

Evidence of UPI’s popularity can also be seen in its spread to neighboring countries such as Nepal and Bhutan. NPCI has partnered with businesses in the US, Japan, Singapore and Dubai to expand base transactions overseas.

UPI is unique because it is

* allows you to transfer money in real time anytime/any day of the month and year by using one mobile app to access different bank accounts

* supported by the security feature of one-click 2-factor authentication – compliant with regulatory guidelines as well as a virtual address that provides additional security as the customer is not required to share account details.

* paying merchants with a single account or through apps and thus does not rely on cash/ATM

* it is possible to raise complaints directly from the mobile application

UPI is a phenomenal Indian technology success story. The interface has contributed to the transition of Indians from a cash-based economy to a digital economy in a short span of time. It’s been interesting to see how the mobile phone has replaced the wallet/checkbook and is slowly taking over the use of cards in transactions. The pandemic has taught us that the future is digital and UPI’s contribution to this cause is remarkable.