12 April
2016
Unified Payments Interface Launched: Here's Your 10-Point Cheatsheet
On Monday, the National Payments Corporation of India (NPCI)
launched the much awaited Unified Payments Interface (UPI). It's being hailed
by many as one of the biggest changes to take place in the financial sector,
but what is the UPI, and what does it mean to you? Here's a
quick guide to everything you need to know about the UPI:
1. The UPI is a system
for instant, online bank payments.
2. To send money to
someone, you need to know only their UPI ID - a virtual identity like an email
address. This could be your name, or your phone number, so for example, if your
phone number is 1234567890, then your virtual address could be 1234567890@sbi
(if your bank is SBI) or 1234567890@axis (if you're an Axis bank customer), and
so on.
3. UPI eliminates the
need of knowing the recipient's name, their bank account number, and IFSC code
(or bank branch).
4. UPI is built on top
of the IMPS, which you may have used to transfer money between bank account.
Like IMPS, UPI is immediate, and works 24x7, through the year, unlike NEFT or
RTGS services, which have specific working hours.
5. The UPI can also be
used for shopping online - instead of entering your debit card number, expiry
date, and CVV code, followed by waiting for the OTP, you'd just enter your UPI
ID, and get an alert on your phone to verify the transaction.
6. Because it's using
the phone to verify transactions, UPI is secure - someone else can't just enter
your ID and spend your money.
7. Anyone can also use
the UPI to send a request for money, like an invoice. This means that anyone
could become a merchant, and take payment for any goods or services from your
account to their account.
8. According to AP
Hota, MD and CEO NPCI, 29 banks have already agreed to provide UPI services,
and he expects the number to increase further this year.
9. "Our focus is
in line with RBI's vision of migrating towards a 'less-cash' and more digital
society," Hota added.
10. "UPI will make
payment systems fully interoperable across all players without having silos and
closed systems, by enabling one-click for two-factor authentication," said
Vivek Belgavi, Leader Financial Services Technology PwC India.
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12 January 2016
Unified Payments Interface (UPI) Is Coming - What Does It Mean for You?
Are we
finally seeing the tide turn away from cash towards digital money? There are
many reasons to hope for this, as 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. And
the change might be coming this year. In an interview with Limit, AP
Hota, Managing Director and CEO National Payments Corporation of India (NPCI)
said that the Unified Payments Interface (UPI) will go live in April this year.
The
NCPI operates the Rupay payments infrastructure that - like Visa and MasterCard
- allows different banks to interconnect and transfer funds. The UPI can be
thought of as a digital framework to do the same - the idea being that all
financial instruments can be given a unique identity on the UPI, which can then
be used to quickly and easily carry out online payments.
What
does this mean for you?
The UPI can be thought of like an email ID for your money. It will be a single identifier that your bank uses to transfer money and make payments using the Immediate Payments Service (IMPS) - which lets you transfer money immediately and works 24x7. What this could do is make online payments much easier without requiring a digital wallet or credit or debit card.
That's
because, right now, if you want to make a bank payment online, you either need
to know the other person's Mobile Money Identifier (MMID) and phone number, or
you have to enter their account number, account type, and IFSC code. Even if
you have all these details, typing it all in, particularly on a phone, is a
painful process, as you add the payee first, then make the transfer.
The
idea behind the UPI is to do away with all of this - hypothetically, it could
be as simple as Gopal Sathe having the UPI of gopalsatheicici - though of
course, this could lead to problems as multiple people with the same name might
have the same bank. But perhaps an Aadhaar-like unique number code or even your
email address could be your UPI. It would be the only information you need to
transfer money from your bank - which could be sent as a remittance to your
family, or could be used for a payments platform.
It's
all connected
By simplifying net-banking, the UPI could simplify online transactions - right now, you either have to enter your credit/ debit card number, name, expiry date and verification codes, or sign in with your net-banking account and go through a similarly tedious process, or use a digital wallet such as MobiKwik or Paytm to make a quick payment.
With
the UPI, you might simply need to enter your details, and get a billing request
on your phone - which you can accept or reject right away. As smartphones
become more and more powerful at low price points, we are now at a point where
it's not unreasonable to think that the local grocery story that you have a
running account for your eggs and bread and other daily purchases, could take
your UPI details and then at the end of each week or month, just send your bank
a request for the money owed. And on your phone, you'd have to enter your
password to complete the transaction.
The
money would then instantly get transferred from your bank account, directly to
the seller's account, and there would be a digital record of transactions that
normally took place using cash. And since it relies on two factors for
authentication - you would need both a phone with a registered application, and
your password, to accept a payment - this means it's a secure method of
payments too.
Since
it does not rely on people having debit or credit cards at all, and simplifies
net-banking instead, the UPI could open up online payments for a huge number of
people.
Will we
still need mobile wallets?
Mobile wallets have been growing in popularity in India as they make it easy to carry out transactions on different platforms. Today, you can use money saved in a digital wallet to pay for your taxi ride, book your lunch, buy movie tickets, or even train tickets.
Despite
this the majority of users still use mobile wallets mostly to recharge phones,
according to various sources in all the major companies in this field. Perhaps
one of the limiting factors has been that you still needed to use a credit or
debit card, or netbanking, to transfer cash to the wallet in the first place,
with limits on how much money can be stored and transacted per month.
The UPI
could make it easier to refill your virtual wallet and use it - but it could
also become easier to directly transact with a seller. In that case, would
people still require digital wallets?
"The
Unified Payments Interface augurs well for us. MobiKwik already has millions of
users paying their bills using the wallet," says Bipin Preet Singh,
Founder and CEO MobiKwik. "The convenience, security, and speed that we
offer to users keeps bringing them back to the platform. With the Unified
Payments Interface in place, our expectation is that we would unlock a new
channel for growth since the universe and reach would enlarge."
It's a
view that is shared by Govind Rajan, COO FreeCharge. "We don't want people
to keep money in the wallet, we want them to use us as a processor," he
says. "That will happen because of the security and speed we can provide,
so the more options there are for people the better. We're not competing with
other wallets or digital systems - right now, the challenge is to take on
cash."
Gadgets
360 also reached out to Paytm on Friday for a comment, but have not received a
response from the company after an initial acknowledgement of our query. Paytm
founder and CEO Vijay Shekhar Sharma however tweeted that the UPI would
be a key milestone for the country.
(Source- Gadgets 360, a venture of NDTV)
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