United Payment Interface: How Will it Make Life Simpler for You?

Online payments will never be the same, soon you can even book a cab with a single click.

3 min read
Soon everyone with a mobile phone can pay money digitally. (Photo: iStockphoto)

The story was first published on 12 April 2016.

India moved a step closer towards becoming a cashless economy with the launch of National Payments Corporation of India’s (NPCI’s) Unified Payment Interface (UPI) on Monday.

The NPCI operates the Rupay payments infrastructure that – like Visa and MasterCard – allows different banks to interconnect and transfer funds. The UPI can be thought of as a digital framework to do the same – the idea being that all financial instruments can be given a unique identity on the UPI, which can then be used to quickly and easily carry out online payments.

With UPI, will we finally see the tide turn away from cash towards digital money? There are many reasons to hope for this, as digital systems can be used to reduce the opacity of cash, and to build a person’s financial history, which will be an important tool for financial inclusion.


What is Unified Payment Interface (UPI) all About?

With the implementation of UPI, users can transfer money between different banks, or even do an online transaction with far greater ease. The NPCI claims it’s as simple as sending a text message.

Unlike the current scenario when you need an IFSC code and addition of a beneficiary, with UPI the transactions/purchases made are linked to a unique number which acts as your virtual address number for all payments.

What Will UPI Work on?

It is a mobile interface and will work on mobile phones only.


One-Click Secured Payment is Here

Instead of an internet banking password, followed by an OTP code, now users need to just put in their single-access code for all transactions. This process finally gives you a single-click payment mechanism but in the two-factor authentication mode - you need both a phone with a registered application, and your password, to accept a payment - this means it’s a secure method of payments too.

Since it does not rely on people having debit or credit cards at all, and simplifies net-banking instead, the UPI could open up online payments for a huge number of people.

How Does One Start Using UPI?

Some banks have integrated UPI into their existing apps. Some have launched new ones for it. Users can download the app and register - the important part of this is a virtual ID and a mobile pin or MPIN.


Password is Your License to Buy

People can send you money using the virtual ID, and you can shop using this ID.

You can pay for your cab or online grocery without sharing your bank details. All you have to do is share your virtual address provided to you by the bank. The person on the other end will then request you to make the payment, which can be completed once you authenticate the payment by typing in your password.

One must also note that the UPI will be available to users 24x7 as it is based on the Immediate Payment Service (IMPS) platform, currently used for internet banking transactions.

Who Needs E-Wallets?

The UPI could make it easier to refill your virtual wallet and use it - but it could also become easier to directly transact with a seller. In that case, would people still require digital wallets?

Mobile wallet companies like PayTM, PayU and ItzCash say they are more than comfortable with the UPI coming into force.

We are very excited and thrilled with the possibilities of envisioning a simplified and frictionless payments infrastructure with the launch of UPI. All our non-bank members await directions from RBI and NPCI to get ready access and we can surely deliver high digital payments growth as in case of IMPS transactions.
Naveen Surya, Chairman, Payment Council of India & MD, ItzCash

And it seems big players like Flipkart, Snapdeal and Amazon have been gearing up for it as well.

Earlier this month, Flipkart bought PhonePe which is said to be working on a product based on UPI mechanism. Snapdeal already has FreeCharge under its wings and Amazon could make its move in the coming months.

The impact of UPI on electronic wallets is to be seen. Some people say it could mean the end for wallets—a transitory step between traditional payments mechanisms and a full-fledged digital one such as UPI—while others say it will simply make it easier to own and operate wallets.

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