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Unified Payments Interface (UPI)

Topics Covered:

  1. Inclusive growth and issues arising from it.

 

Unified Payments Interface (UPI)

 

What to study?

For Prelims and Mains: UPI- features, objectives and significance.

 

Context: An analysis of data from the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI) and some industry players from April 2018 to March 2019 shows that not only is the UPI platform outperforming e-wallets in terms of the value of transactions done, but it is also eating away at e-wallets’ market share in specific areas such as person-to-merchant (P2M) transactions.

Payments made on the UPI platform saw a remarkable growth of over 400% in the April to March period, from a little more than ₹27,000 crore in April 2018 to ₹35 lakh crore in March 2019.

 

Why UPI is outperforming e- wallets?

  • People are changing the way they transact, choosing bank-to-bank methods such as the Unified Payments Interface (UPI) over other instruments such as e-wallets. This is because UPI is completely interoperable and as such, it is unique in the world, where you have an interoperable system on the ‘send’ and ‘receive’ side.
  • The rapid growth of UPI is accompanied by a reasonably strong growth in the value of transactions done using e-wallets, but the latter’s growth has not taken off much following the fillip it received in the aftermath of demonetisation in November 2016.

 

What is Unified Payments Interface (UPI)?

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.

 

How is it unique?

  • Immediate money transfer through mobile device round the clock 24*7 and 365 days.
  • Single mobile application for accessing different bank accounts.
  • Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet provides for a very strong feature of seamless single click payment.
  • Virtual address of the customer for Pull & Push provides for incremental security with the customer not required to enter the details such as Card no, Account number; IFSC etc.
  • Bill Sharing with friends.
  • Best answer to Cash on Delivery hassle, running to an ATM or rendering exact amount.
  • Merchant Payment with Single Application or In-App Payments.
  • Utility Bill Payments, Over the Counter Payments, Barcode (Scan and Pay) based payments.
  • Donations, Collections, Disbursements Scalable.
  • Raising Complaint from Mobile App directly.

 

Participants in UPI:

  • Payer PSP.
  • Payee PSP.
  • Remitter Bank.
  • Beneficiary Bank.
  • NPCI
  • Bank Account holders.
  • Merchants

 

UPI – Benefits to the Ecosystem participants:

Benefits for banks:

  • Single click Two Factor authentication.
  • Universal Application for transaction.
  • Leveraging existing infrastructure.
  • Safer, Secured and Innovative.
  • Payment basis Single/ Unique Identifier.
  • Enable seamless merchant transactions.

 

Benefits for end Customers:

  • Round the clock availability.
  • Single Application for accessing different bank accounts.
  • Use of Virtual ID is more secure, no credential sharing.
  • Single click authentication.
  • Raise Complaint from Mobile App directly.

 

Benefits for Merchants:

  • Seamless fund collection from customers – single identifiers.
  • No risk of storing customer’s virtual address like in Cards.
  • Tap customers not having credit/debit cards.
  • Suitable for e-Com & m-Com transaction.
  • Resolves the COD collection problem.
  • Single click 2FA facility to the customer – seamless Pull.
  • In-App Payments (IAP).

 

Sources: the hindu.