I’m sure most of you have heard of UPI, which stands for United Payment Interface. It has become the most convenient method of transferring funds, receiving funds, or paying bills. It has transformed the online payment system. The National Payments Corporation of India (NCPI) was launched in 2016, and it is regulated by the Reserve Bank of India.
It has become synonymous with convenience, whether it’s buying groceries from local vendors, paying for a taxi to work, or grabbing a steal at one of the festival sales. Many factors are driving its massive growth, the first of which is an increase in the number of internet users who are active consumers and have access to smartphones.
Let us go back in time to understand the need for and the emergence of UPI:
2009: The NCPI was established to integrate the payment system and make it uniform throughout the country.
2012: The RBI asserted the development of an e-system as part of the green initiative.
2016: It was officially launched.
2019: It became a popular payment option for subscribing to an Initial Public Offering (IPO).
2020: It became the world’s largest real-time payment system, processing over 25.5 billion transactions annually.
2021: With over 25.5 billion transactions processed annually, India overtook China and South Korea to become the global leader in global real-time payment.
2022: The year 2022 has been a significant year for UPIs. Beginning with the RBI’s announcement to link RuPay credit cards with UPI, users can now make payments on QR code-enabled outlets using their credit card via UPI rather than their bank account, enabling an additional alternative.
The RuPay credit card will be interconnected to a digital payment address, also known as the UPI ID, and will allow payment gateway transactions to take place directly. Customers of Punjab National Bank, Union Bank of India, and Indian Bank will be among the first to be allowed to use their RuPay Credit Cards with BHIM and UPI.
Another important feature is UPI lite, a payment option that does not require an internet connection during the transaction. The debit will occur when the internet connection is unavailable, and the credit will occur when it is restored. It is a type of “on-device wallet.”
To use it, users must first transfer money from their bank accounts to the app’s wallet. Since it is an “on-device wallet,” users can make real-time payments without using the Internet. In stage one, it will process money transfers in near offline mode, i.e., debits (payouts) can be made without an Internet connection, and credits into the account will be done online.
However, there is a plan to make UPI Lite offline in the coming years, allowing customers to carry out transactions—both debit and credit—completely offline, according to NPCI. The maximum amount that can be transferred using it, is 200 rupees, and the most balance, you can have, at any given time is 2000 rupees, plus any additional limits that NPCI may have from time to time impose.
The beauty of this technology does not end with scan-and-pay or smartphones. As part of the RBI’s financial inclusion initiative, UPI123 was made available to feature phone users in March 2022.
The user must adhere to the following instructions in order to use UPI123Pay:
Step 1: Users need to call the IVR number and link their bank account.
Step 2: Create a UPI PIN using their debit or credit card.
Once the ID is created, the user can avail of any of the services like money transfer, LPG bill payment, electricity bill payment, etc.
Available Options:
- App-based functionality in which a mobile phone manufacturer can install a UPI app that can be used for online money transactions.
- Missed calls based on which consumers can use dedicated merchant payment numbers by making a missed call. The incoming authentication call will request PIN verification to finish the transaction.
- The Interactive Voice Response (IVR) system uses preset phone numbers to determine where the payment transaction will wind up.
- Payment in offline mode is made via a sound-based device by the featured phone, which transmits sound that is picked up by a speaker or microphone at the merchant’s end.
Globalization of UPI:
- This payment system or technology was adopted for the first time by Nepal. This initiative would encourage more individuals to adopt digital payment systems, increase the pace of cashless transactions in Nepal, and enable instant P2P (person-to-person) and P2M (person-to-merchant) UPI payments.
- Along with the launch of the BHIM UPI mobile application, Bhutan has already adopted UPI standards for its QR code.
- Singapore and India are collaborating to connect UPI to PayNow in Singapore, enabling rapid, low-cost, cross-border money transfers. It is expected to go live in the second half of 2022.
- The National Payments Corporation of India (NPCI) and Mashreq, one of the biggest financial institutions in the UAE, have partnered to give UPI acceptance across the nation.
- In France, the NPCI has signed an MoU (memorandum of understanding) with Lyra Network for the country’s approval of UPI and RuPay.
By this point, I hope you have an understanding of the need and purpose behind UPI. In the days ahead, we will see additional advancements and breakthroughs that will make India truly digital.
Writer: CA Suraj Kar
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