Unified Payments Interface (UPI)

About Unified Payments Interface (UPI)

• The UPI is a digital and real-time payment system developed by the National Payments Corporation of India (NPCI) and regulated by the Reserve Bank of India (RBI).  
• It was launched on April 11, 2016.  
• It is designed to enable peer-to-peer inter-bank transfers through a single two-click factor authentication process.   

Features: 

• It eliminates the need to enter bank details or other sensitive information each time a customer initiates a transaction. 
• Unlike traditional methods, UPI simplifies transfers using the recipient's UPI ID, be it a mobile number, QR code, or Virtual Payment Address, eliminating account numbers. 
• It also works with "Peer-to-Peer" requests, which can be scheduled and paid for based on need and convenience. 
• UPI operates as a digital public infrastructure, allowing seamless interactions for all players, including merchants and customers, without transaction costs.
• It facilitates push (pay) and pull (receive) transactions and even works for over-the-counter or barcode payments, as well as for multiple recurring payments such as utility bills, school fees, and other subscriptions.
• A consistent UPI transaction PIN across apps enhances cross-operability, enabling 24/7 transactions. 
• PI uses technologies like the Immediate Payment Service (IMPS) and the Aadhaar-Enabled Payment System (AEPS) to ensure that payments between accounts go smoothly.  
  

Initiatives to promote UPI

• UPI for secondary market: Introduced by NPCI to enhance the ease of equity trading in country.
• India’s UPI in overseas markets: Various countries like Oman, UAE, France, Nepal, Bhutan etc. are using UPI system for payment.
• UPI 123PAY: It is an instant payment system for feature phone users who can use UPI payment service in a safe and secure manner

Benefits of UPI 

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

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

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

Challenges associated with UPI 

Regulation: 

• Expanding UPI to accommodate a global user base will require adhering to data protection, financial laws and regulations of different countries posing regulatory and compliance challenges. 
• Also, significant scalability in terms of software, network and partner banks is required. 

Security and Fraud: 

• Cybercriminals may exploit vulnerabilities in the system or use social engineering techniques to gain access to sensitive information leading to financial losses.

Lack of awareness: 

• UPI remains a barrier to its widespread adoption especially among individuals with a lack of familiarity with digital payments, leading to financial fraud.