The National Payments Corporation of India introduced the Unified Payment Interface (UPI) in India in 2016, facilitating interoperable digital transactions between citizens, banks, and merchants. It is a new payment model that allows users to carry out digital transactions within seconds using an app on their smartphones. In 2020, the Reserve Bank of India made it mandatory for all payment providers to use a UPI QR code instead of a proprietary code from March 2022. With this rule, an individual can scan any QR code from their UPI payment app at a merchant store to complete the payment.
Making digital payments much easier and faster than before, UPI has been a game changer in India. Here, you will find more details about UPI and its impact on the Indian payment system.
How Does UPI Work?
UPI stands for Unified Payment Interface, which means it is a uniform interface that users need to make digital payments from any platform. It makes the funds transfer process much easier and faster than before. Instead of installing several apps to support their proprietary payments, users can now make payments to any platform using a UPI payment app on their device. While paying through a UPI app, there is no need to enter the receiver’s account number, bank name, account type, and IFSC code. Instead, the user can simply scan the UPI QR code at the merchant’s store to transfer money from their account directly to the merchant’s account within seconds.
When a user scans a UPI QR code, they receive an OTP (one-time-password), which the user needs to enter to authenticate the payment. So, the entire process is as simple as ‘Scan and Pay. The ease and speed of UPI payments have made the platform a preferred digital payment medium among Indian consumers. All they need is an internet-enabled smartphone with a UPI app, a bank account, and an active mobile number linked with the bank account.
Features that Make UPI the Best Payments Platform
Some of the best UPI features include:
- Instant funds transfer through IMPS
- 24/7 service due to 100% digital platform
- Single mobile app for multiple bank accounts
- No need to enter the card number, account number, IFSC code, and other sensitive information
- 2-factor authentication with a single click
- Eliminates the need for hard cash
- Complaint resolution directly from the app
- Easy donations, collections, and disbursements
- Single platform for OTC payments, barcode-based payments, and utility bill payments
Benefits of UPI
UPI benefits all the parties involved in a transaction, including banks, consumers, and merchants. Let’s see how.
- Universal application for all transactions
- Single-click two-factor authentication
- Safer and secure method of digital payment
- Easy transactions
- Unique identifier
- Single payment platform
- Easier and faster payment collection
- No need to store customers’ virtual addresses
- Most suitable for e-commerce and m-commerce transactions
- Credit and debit cards not required
- In-app payments within seconds
- No hassle of cash-on-delivery
- A single application to access various cards and bank accounts
- Round-the-clock availability
- Ultimate security for virtual ID
- Easy complaint resolution directly from the app itself
- Perform transactions from a smartphone app
Fees and Charges
No one needs to pay any fees and charges to the UPI payment app. To promote the digital payment system in India, the Indian government kept these apps absolutely free of charge for the users, banks, as well as merchants.
As far as security is concerned, a UPI transaction is secured with UPI PIN, a 4-6 digit code. Besides that, UPI apps have high bandwidth capacity and are high encrypted for utmost security. So, all these reasons have made UPI a game changer in India.