From Jan Dhaan Yojna to Aadhar-based Direct Cash Transfer schemes, the Indian government is taking several measures to digitalize the Indian economy. An increasing number of people are now using the digital payment gateways for services such as online shopping, cabs booking and even for micro payments such as mobile recharge and transfers to friends and families. Thanks to wider availability of low-cost smartphones, internet connectivity and banking applications, the mobile banking volume in India has also grown multifold. This has given rise to a number of e-wallets that leverage mobile platform for cashless payments. The Reserve Bank of India (RBI) has also announced its Unified Payment Interface (UPI), which could be a game changer in the current era of cashless payments.
Today, with over 10 million merchants and retailers, only six percent have the infrastructure for accepting card payments, whereas most transactions taking place are in cash. Due to this, it becomes difficult for the government to track the cash flow, and it is not able to collect tax from such cash-based transactions. However, with the new Unified Payment Interface, the government aims to offer a universal electronic payment method that will help India in becoming a cashless society. At the same time, it will also help the government in knowing the cash flow and collect tax accordingly.
A couple of months ago, RBI Governor Raghuram Rajan launched UPI, the ambitious payments architecture for instant online bank payments. The interface has been developed by National Payments Corporation of India (NPCI), which is an umbrella organization for the country’s retail payments. UPI aims to allow users to send and receive money, make utility payment and more using a single password and identification. Let’s get a little in-depth to know more about UPI and its benefits.
How is UPI better than third-party payments?
The UPI app will greatly impact on the existing third-party payments. Today, in order to pay someone, you need to add them as a beneficiary. You also need their full name, bank account number, branch and IFSC code. However, the UPI app does away with these procedures, and all you need is the unique ID of the receiver.
While RTGS and NEFT work on specific days and have limited working hours, UPI works 24 hours a day and seven days a week. Also, as UPI is built on top of IMPS, the money transfer takes place immediately. Once you have the unique ID, simply open the app, enter the amount to be paid, the beneficiary’s unique ID and hit ‘send’ – it is that simple. In order to initiate safe transaction, the app will also ask you for a mobile pin to authenticate the payment.
Which banks are a part of UPI?
As of now, 29 banks are a part of UPI network, out of which 15 major banks have already integrated the interface into their smartphone apps. These banks include the likes of ICICI Bank, HDFC Bank, Canara Bank, SBI, HSBC, Citi Bank, Bank of Baroda and Punjab National Bank among others. Currently in final testing stages, UPI is set to go live by July end with these banks.
What are the transfer limitations and where all can you pay?
The app will allow users to pay for transactions as low as Rs 50 and go all the way up to Rs 1 lakh. For instance, if a group of friends go to have lunch or dinner, one can pay for all, whereas others can transfer money directly to the person’s account.
UPI can be used for grocery shopping at the supermarket, or online shopping as well. It will eliminate the need of entering card details such as number, expiry date, CVV code and OTP. All you need to do is – enter the unique ID and you’ll get a notification to verify the transaction on your phone. That’s not all; UPI app can also be used to make payments after receiving goods. A buyer can send money by scanning the company QR code or by entering the unique ID of the company.
Overall, UPI will eliminate the need of having and maintaining a mobile wallet. UPI app is indeed a significant step to move towards cashless economy. As to how it will impact on the existing mobile wallets such as MobiKwik, Paytm, Oxigen and others remains to be seen. Recently, Flipkart acquired a startup, PhonePe that is making solutions around Unified Payments Interface.