What is UPI? (Cashless India)
-By Priyasy Bokadia • July 8, 2023• 6 min read
UPI - Unified Payment Interface, often referred to as the brainchild of former RBI governor Dr. Raghuram G. Rajan, has been hailed as a significant contribution to India's digital payment landscape. Launched a few months before the conclusion of Rajan's tenure, it is often considered his parting gift to the country. NPCI states, “Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.” UPI operates through two types of transactions: P2P (Peer-to-Peer) and P2M (Peer-to-Merchant). These transactions involve four parties, which collectively form the 4 Party Model. NPCI ensures that data flows between banks and payment applications are sent to valid and certified destinations. NPCI and all the 4 parties work together to facilitate real-time transactions and ensure seamless and secure transfers between individuals and merchants within the UPI ecosystem. Did you know? NPCI conducted a pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their UPI-enabled Apps on Google Play store from 25th August 2016 onwards. UPI offers several benefits that make it a popular payment option among users in India. One of the most significant advantages of UPI is its ease of use. With UPI, users can make transactions with just a few taps on their smartphone, without the need for bank account details or IFSC codes. This makes it a convenient option for users who want to make quick and easy transactions.Did you know that UPI, which made its debut in 2016 with only 21 banks, experienced nearly 0 transactions for four months consecutively? Fast forward to today, and UPI has emerged as a global leader in digital payments! But, what is UPI, you ask!
What is UPI (Unified Payments Interface), and how does it work?
How is UPI unique to any other mode of payment? Features and Benefits of UPI
Another advantage of UPI is its interoperability. UPI allows users to send and receive money between different banks and payment apps, making it a versatile option for users. This means that users can transfer funds between different accounts and payment apps without incurring any additional charges or fees.
UPI also offers a high level of security and privacy. Users need to authenticate their transactions using their UPI PIN, which ensures that only authorized transactions are processed. Additionally, UPI uses advanced encryption technology to protect user data and prevent fraud.
UPI (Unified Payments Interface) created by the National Payment Corporation of India (NPCI) is a one-stop solution for all digital payments and here are some features and benefits of UPI listed:
Single Click 2 Factor Authentication – Aligned with the regulatory guidelines provides for a very strong feature of seamless single click payment.
UPI transactions happen through Virtual Payment Addresses (VPA) or UPI IDs, so you never have to share your bank account details, With UPI-led transactions, your bank account details remain confidential, enhancing security compared to other transaction methods. By eliminating the need to share sensitive information, such as account numbers or IFSC codes, UPI minimizes the risk of fraud or unauthorized access.
Merchant Payment with Single Application or In-App Payments. Merchants do not pay transaction fees when they accept UPI payments, making it a low-cost choice compared to other modes of payment. Additionally, UPI payments are credited to the merchant's bank account in real time, which allows them to keep track of their finances more easily
UPI allows instant mobile money transfers 24/7, including holidays and after banking hours
UPI offers the convenience of linking multiple bank accounts to its platform, allowing users to make seamless payments. This eliminates the hassle of switching between different banking apps or carrying numerous debit cards. Also, users can access and manage all their bank accounts in one place.
Being RBI-regulated, UPI is entirely safe and secure. Security measures like encryption protocols, multi-factor authentication, and constant monitoring of transactions to detect and prevent fraudulent activities and safeguard the UPI ecosystem
UPI transactions take place instantly, making it a convenient option for small transactions. Whether you're splitting a bill with friends, paying for groceries, or making any other quick payment, UPI eliminates the need for cash or lengthy transaction processes.
UPI combines several banking features to allow for the seamless routing of funds and merchant payments under one interface like bill payments, e-commerce shopping and more.
Most UPI platforms provide rewards and cashback on various transactions, leading to increased savings. Whether you're shopping, paying bills, or transferring money, these rewards and cashback programs can help you earn additional benefits.
UPI is a useful alternative to the inconveniences associated with Cash on Delivery or rushing to an ATM for money withdrawals. It eliminates the need for physical cash by enabling instant payments directly from your bank account.
