Unified Payment Interface
We are turning away from cash to digital money. Online payments, debit cards, credit cards, various wallets indicate that we are moving towards digital currency. The recent launch of Unified Payment Interface (UPI) by National Payment Corporation of India (NPCI) will change things for better, and will bring a rapid movement towards digital Platform. 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.
Let’s try to understand what is UPI?
UPI can be considered as an email ID for monetary terms. It is a single identifier which banks will use to transfer money and pay using Immediate Payment Services(IMPS eg RTGS, NEFT, Debit, Credit etc).It will make online payments much easier without requiring a digital wallet or credit or debit card.
UPI will eliminate the need to exchange sensitive information such as bank account numbers, one-time passwords or phone numbers during a financial transaction. The idea behind UPI is to do away with all the information one needs to feed while making an online transaction or transfer of money and replace it with a single id. UPI id would be the only information you need to transfer money from your bank. This virtual address will allow you to send and receive money from multiple banks and prepaid payment issuers. The UPI seeks to make money transfers easy, quick and hassle free.
Ten major banks — SBI, Canara Bank, BOI, ICICI Bank, HDFC Bank, Punjab National Bank, Bank of Baroda, HSBC, and Citi Bank — are integrating the interface with their mobile apps. “29 banks had concurred to provide UPI service to their customers. A transaction can be carried out only if both sending and receiving banks have enabled the IMPS.
How it works?
A user is given a 7-digit Mobile Money Identifier (MMID) Code. The sender initiates payment using mobile bank by giving the MMID code and registered mobile number of the beneficiary. To initiate the payment, UPI invokes this virtual identity of the beneficiary and transfers money in real-time. It works on single-click 2-factor authentication. Most banks offer this service free-of-cost now. It is a round-the-clock immediate payment service.
Impact of UPI
The UPI will allow you to use any bank product without being a customer of that bank. The introduction of UPI can have a significant impact on the retail payments space.UPI will make transactions through the mobile easier and more secure will reduce the high reliance on cash in the economy.
However, The launch of UPI will impact wallets, especially those services that exist only as a product that allows ease of transaction.