Unified Payment Interface (UPI) – a Game Changer of Payment System

Unified Payment Interface

Mobile banking is becoming increasingly sophisticated and with the launch of Unified Payment Interface (UPI) more innovation, simplicity, security and speed has been added to the entire payment arena. Industry experts are considering UPI as the gamer changer of the present payment system in India as it will transform the way we make payments to various retail stores, restaurants, for cabs, do utility payments etc. Developed by the National Payments Corporation of India (NPCI), the UPI aims to move towards a cashless model of economy. Regarded as the most important initiative, Unified Payment Interface will play a vital role in implementing government’s JAM (Jhan Dhan Yojana, Aadhar and Mobile) vision.

RBI’s vision for Payment Systems in India

Payment Systems in India: Vision “To proactively encourage electronic payment systems for ushering in a less-cash society in India and to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards.

In line with this, the National Payments Corporation of India (NPCI) has also visualized and launched an Indian domestic card payment scheme “RuPay”. It was created to have a domestic, open loop, and multilateral system of payments in India. RuPay facilitates electronic payment at all Indian banks and financial institutions. RuPay will make the transaction cost affordable and will drive usage of cards in the industry.

Objectives of UPI

Objectives of Unified Payment Interface system is to offer an architecture and a set of standard APIs to facilitate the next generation online immediate payments, leveraging trends such as increasing smartphone adoption, Indian language interfaces, and universal access to Internet and data.

Traditional Fund Transfer Methods

Most of the electronic payments in India are facilitated through National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS).

In NEFT, the bank details of the sender and the beneficiary are linked using IFSC code and bank branch name. When a payment is commenced, the payer’s bank sends a ‘message’ to its NEFT service centre. All such messages are pooled every hour and the bank’s NEFT centre sends it to the RBI, which starts the transfer. The process takes places only during working hours and takes few hours.

On the hand fund transfer through Real Time Gross Settlement (RTGS) is handled on one-to-one basis. It is generally used for making large value transactions, typically more than Rs. 2 lakhs. RTGS transactions are also done during working hours.

Immediate Payment Service (IMPS) is now gaining importance as it round-the-clock immediate payment service. To initiate the payment, sender needs a 7-digit Mobile Money Identifier (MMID) Code and registered mobile number of the beneficiary.

How does UPI work?
Imagine buying clothes from a mall by paying cash. How you make the purchase? You give cash at cash counter, the biller gives you a receipt and purchased good. UPI is even simpler than this. Instead of giving cash, you tell your virtual identity to the cashier. The cashier will then generate an invoice using UPI, you will approve the invoice on your mobile and the payment is made.

So to make payment through UPI, you need a bank account and a smartphone. Once a user is registered for UPI with his/her bank , a virtual address is created which is then mapped with user’s mobile number.

This entire new arrangement is:
Highly secure – as there is no need to disclose identity while making payments

A single click-two factor authentication system – each transaction being authenticated at two levels with one click

Available all the time – UPI runs on Immediate Payment Service (IMPS) platform, hence the service will be available in real-time and 24×7

An inter-operable system – You will be able to use the products of any bank, even if you are not a customer, which has entered into an agreement to use the UPI platform

Cost effective – Transactions through UPI will reduce fees which go to many mediators while making payments through debit/credit cards.

Spice Digital’s participation in UPI Initiative

Spice Digital’s team named “Enablers” had participated in Unified Payment Interface (UPI) Hackathon, 2016 launched by the National Payments Corporation of India, presented their rock solid solutions and emerged out as one of the top five finalists.

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