Customer needs is a smartphone with the Unified Payments Interface (UPI) Application for instant online payment of Utility bills, School fees, over-the-counter payments and online shopping.

The system will allow customers to instantaneously transfer funds across different banks with the use of a single identifier which will act as a virtual address and eliminate the need to exchange sensitive information such as bank account numbers during a financial transaction.

All that a customer needs is a smartphone with the UPI application (app) downloaded for instant payment of cash. It does all the functions of a debit card or internet banking in a more secured environment. Created by the National Payment Network Company (NPCI), set up with the support of the Reserve Bank of India and Indian Banks Association (IBA), UPI is a unique payment solution as the recipient is now empowered to initiate the payment request from a smartphone without using credit or debit card and internet banking. While as many as 29 banks have concurred to provide UPI service to their customers, 21 banks have already joined the UPI as payment service providers (PSPs) and their service will be available to the customers in the next one or two months.

“For a number of years, we have been saying we need a revolution in banking in India. I think we can confidently say the revolution is upon us. What we have in India is the most sophisticated public payments infrastructure in the world,” Rajan said at the launch of the UPI last week.

Why do we need a platform like this?

The record of cashless transactions in our country is very dismal. At present it stands at 6 transactions/person/year which is partly due to the fact that out of the 10 million plus retailers in India, hardly 1.1 million have card payment acceptance infrastructure. The RBI has been vocal about ushering in more cashless transactions and one of the ways to do so is to tap into the expanding smart phone ecosystem that is slated to reach close to 500 million users in next five years.

How it works?

  1. Banks will have to first enable UPI system
  2. Customers will have to ask their banks to connect them to the UPI system.
  3. For making any transaction, two options are available i.e. you can either global or local address.
  4. Global address means mobile number, Aadhar number and bank account number.
  5. Local address means a virtual address, which banks will provide you.
  6. So if you want to make payment through smartphone, let’s say to a grocery store owner then just provide your virtual address to the owner. Normally you provide either the bank account number or swipe your credit/debit card and enter security PIN.
  7. Owner will then enter this address in his mobile phone.
  8. You will then receive message on your cell phone requesting authentication.
  9. You need to then authenticate this transaction by entering a password. So if you receive any unauthorized request, it can be easily rejected.
  10. If all the steps go correctly, transaction will be successful.
  11. Money will be directly debited from your bank account and get credit into the bank account of the service provider. In this case, grocery store owner.
  12. Thus neither the taxi driver nor you, would be required to share each other’s bank account details. And there is no need of swiping debit/credit card, keying in your confidential PIN

Features of UPI:

  • Unified Payment Interface (UPI), which will make money transfer as simple as sending a text message.
  • In the first phase, which will start next week, 29 banks will operate the platform.
  • It will be inter-operable across different banks and will allow instant payments.
  • Payments can be made by only knowing the mobile or Aadhaar number.
  • The platform will help eliminate the requirement of receiver’s bank account, IFSC code.
  • UPI is set to allow you to make payments using your mobile phone as the primary device without the need for you to download an app to send or receive money.
  • UPI runs on Immediate Payment Service (IMPS) platform, the service will be available real-time and 24×7.