What is Unified Payment Interface (UPI)?
The Indian government was not late in recognizing the digital revolution and so sought to harness this pattern of digitalization towards black money and financial inclusion into its transition. The “UPI” (Unified Payment Interface) was also one of the many initiatives and inventions brought out by the government to accomplish its goal. UPI is a system that drives several bank accounts into one smartphone application, combining various banking functions, streamlined routing of money, and retail payments into one hood. National Payments Corporation of India (NPCI), India’s umbrella body for all retail payment services, had embarked on this revolutionary plan to introduce “Unified Payment Interface” that simplified and included a single platform for all networks. Before the introduction of UPI, some of the issues that the E-Banking industry in India faced were — only six non-cash transactions or E-payments per person, very less usage of card payment services in physical stores, very less number of villages in India actually using banking services (Kakade & Veshne, 2017). To make the E-banking system more straightforward, the more accessible, more efficient government introduced NPCI (India’s National Payments Corporation) in 2009 (NPCI, 2020), which manages all E payments in India and is set up with guidelines and funding from India’s Reserve Bank (RBI) and Indian Bank Association (IBA). It has taken several measures to clear since the launch of the NPCI and offers a simple user payment mechanism for all the schemes. UPI utilizes proven mechanisms such as Immediate Payment Service (IMPS) and Aadhaar Enabled Payment System (AEPS) to ensure that all transactions are resolved smoothly. It supports push (pay) and pull (receive) transfers, and also functions with over-the-counter or barcode sales, as well as numerous periodic payments such as energy bills, school fees, and other services. The program enables mobile purchases to be made after a collective identity has been identified without the usage of credit or debit cards, net banking, or the need to enter account data. This will not only ensure more excellent protection of confidential details but would also allow individuals that have bank accounts through smartphones to conduct trouble-free transactions. UPI means fewer cash sales, and it theoretically decreases the number of unbanked communities.
As of August 2020, NPCI is planning to take UPI global, and with its first pilot project already launched in Singapore, the NPCI claims that it had early talks with the Bank for International Settlements, the World Bank, and the Bill & Melinda Gates Foundation to identify future partnerships (Financial Times, 2020). Transaction volumes of the network grew to a record 1.34bn in June as Covid-19 erupted, causing Indians to isolate themselves socially and avoid cash (Financial Times, 2020). Google has also supported the idea of UPI-like architecture to be adopted in the US (Bloomberg Quint, 2019). In August 2019, the Federal Reserve Board of Governors released a report seeking to create a digital real-time gross settlement operation interbank 24x7 that will enable quicker payments in the U.S. (Federal Reserve System, 2019). The central bank has welcomed feedback from interested stakeholders about what the ‘FedNow’ service’s architecture and usability could look like. The project will be phased out by 2023 or 2024, reads the document. Google also suggested that the Fed adopt an open-payment platform close to one in which UPI is focused, meaning that private companies can collaborate together to identify innovative approaches that can better benefit end-users. Google has also demanded that U.S. technology firms be able to view bank account details of end-users at the behest of the customer.
REFERENCES —
Kakade, R. B. & Veshne, P. N. A., 2017. UNIFIED PAYMENT INTERFACE (UPI) — A WAY TOWARDS CASHLESS ECONOMY. International Research Journal of Engineering and Technology (IRJET), 4(11).
NPCI, 2020. About Us. [Online] Available at: https://www.npci.org.in/about-us-background [Accessed 29 June 2020].
Financial Times, 2020. India eyes global online payments push as transactions boom. [Online] Available at: https://www.ft.com/content/a6b87e08-4718-4ee8-b29b-c007c6bbb2bb
[Accessed 29 July 2020].
Bloomberg Quint, 2019. Can India’s UPI Become A Global Model? Google Thinks So.. [Online] Available at: https://www.bloombergquint.com/business/can-indias-upi-become-a-global-model-google-thinks-so [Accessed 18 July 2020].
Federal Reserve System, 2019. Federal Reserve Actions to Support Interbank Settlement of Faster Payments. [Online] Available at: https://www.federalreserve.gov/newsevents/pressreleases/files/other20190805a1.pdf [Accessed July 2020].
