Introduction :- 

UPI is standardized across banks, which means you can initiate a bank account transfer from anywhere with a few clicks. This means that UPI will help you to pay directly from your bank account to different merchants without the hassle of typing your netbanking password, credit card details or IFSC code. Apart from cards, netbanking and wallets, your can now pay through UPI too Unified Payment Interface (UPI) allows to pay someone as well as ‘collect’ cash from someone.

Unified Payment Interface (UPI) is a newly introduced platform to transfer money between any two bank accounts in India, by avoiding the existing complexities. UPI is an indigenous payment system which works with the help of a smartphone.

Recently, National Payment Corporation of India (NPCI) has upgraded the Unified Payment Interface (UPI) with enhanced features.

UPI :- 

Even after introducing net-banking in India, the number of cash transaction happening in India is very high (almost 95% of all transactions). UPI is part of RBI’s efforts towards ‘Less Cash’ India.

UPI was developed by National Payment Corporation of India (NPCI) under the guidelines of RBI. UPI is based on the Immediate Payment Service (IMPS) platform.

UPI is now publicly available. Check if your bank has released an updated mobile app with UPI support already.

1. Download the UPI app of your bank from Google Play Store/Apple Apps Store and install it in your phone.
2. Set app login.
3. Create a Virtual Payment Address (VPA). Eg: Roychoudary@icici
4. Add your bank account.
5. Set MPIN.
6. Start transacting using UPI.

Payment :- 

For example, consider that you are trying to book tickets online for a film via your mobile.

When you click buy, the mobile website/ mobile app you used will trigger the UPI payment link. Now, you are taken to the pay screen of the UPI app. Here, the transaction information is verified and a click followed by entry of a secure PIN completes the purchase.

It is safe as the customers only share a virtual address and provide no other sensitive information. The ‘virtual payment address’ is alias to your bank account.

The virtual payment addresses doesn’t allow your security to be compromised when a certain merchant’s account is hacked, because their database will have only a list of virtual addresses. The payment addresses are denoted by ‘account@payment_service_provider’.

It offers better security than other payment methods where details like credit card numbers are send. While using UPI, all these details are hidden as only a Virtual Payment Address (VPA) is used.

About NPCI

• It is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007
• It is the umbrella organization for all retail payments and settlement systems in the country.
• It also manages the UPI platform
• It links all the ATMs in India

New features in UPI 2.0 :- 

• Linking of overdraft account – Apart from the savings and current accounts, the UPI users can now link their overdraft account to it and all the facilities and benefits of overdraft account would be made available to the users.
• One-time Mandate (account blocking) – It allows customers or merchants to pre-authorize a transaction and pay at a later date. It would also ensure that the customers do not miss the payments.
• Invoice in the inbox – It allows the users to check the invoice sent by merchant in their own inbox prior to making the payments, thus allowing the customers to check the credentials beforehand.
• Security Layer in QR – The app allows the users to scan the QR code and check the authenticity of the merchants through notification to the user to ascertain the information.
• Increased Transaction Limit – The pre-existing transaction limit (1 lakh daily) has been raised to 2 lakh daily.

Challenges :- 

• Even though the transaction limit has been raised to 2 lakh but certain banks still have limits much lower than 1 lakh while individual app such as BHIM, Whatsapp etc. have even lower limits.
• There is also lack of initiatives from banks for penetration of QR Codes for UPI whereas wallets have aggressively placed their stickers.
• The invoice in the inbox may have a deeper security risk as it may be accessible to anyone with the link which could lead to increased and unnecessary data harvesting.
• The overdraft feature of the UPI 2.0 may also lead to over-spending leading to banks charging the account holders.
• UPI 2.0 also doesn’t have a grievance redressal mechanism that would ensure refund of failed transactions in a reasonable time period.
• The ‘standing instruction’ feature that would allow recurring payments from the user’s bank account towards loan payment or bill payment after a specific interval, enabled by a one-time digital mandate need to be included to tap Rs 9 lakh crore worth of bill payments market which is still dominated by cash.