Executive Summary – Unified Payments Interface (UPI) has been launched to facilitate transfer of funds between persons/organisations via smartphones. You do not need cash/card for money transactions. Once you download the UPI app and register, you can receive and pay money using your virtual address and M-PIN. UPI aims to simplify transactions, arrest tax evasion thereby boosting government revenue and support e-commerce business.

What is UPI?
It is late evening and you are going home in a rickshaw and you realise you do not have money to pay him and there is no ATM around. Chances are that the ATM will dispense only ₹ 500 notes and you will have to argue over change with the auto wallah.
​You have gone on a team dinner with your office colleagues and it is time to split the bill and lo behold you have forgotten your wallet!! It is embarrassing to ask your colleague to pay for you as there might be seniors and juniors around too.
The National Payments Corporation of India (NCPI), RBI and Indian Banks Association have come together to launch the Unified Payments Interface (UPI) which might save you from such situations. The UPI will facilitate immediate transfer of funds from one person to another via a smartphone. It can work without requiring cash or card in hand. It is being showcased as an alternative to mobile wallets and other mechanisms of transfer of funds such as NEFT.

How do I get it?
​You will need a smartphone and the UPI application of any of the participating banks downloaded and installed in it. You have to register your details and a virtual address. For example if your name is Aman and have the UPI application of Punjab National Bank, then you need a unique virtual address such as aman@PNB. The virtual address can be <<your mobile number>>@PNB too. You can then use this ID for receipt and payment of money up to ₹ 1,00,000. This id can be used for person to person transfer or person to organization transfer.

Which banks are offering this method of transaction?
Currently the following banks offer the application –

• Andhra Bank
  
• Axis Bank
  
• Bank of Maharashtra
  
• Bhartiya Mahila Bank
  
• Canara Bank
  
• Catholic Syrian Bank
  
• DCB Bank
  
• Federal Bank
  
• ICICI Bank
  
• TJSB Sahakari Bank
  
• Oriental Bank of Commerce
  
• Karnataka Bank
  
• UCO Bank
  
• Union Bank of India
  
• United Bank of India
  
• Punjab National Bank
  
• South Indian Bank
  
• Vijaya Bank
  
• Yes Bank

Two major banks – SBI and HDFC have yet to join to provide this facility.

How does UPI work?

For transfer of money,
If you are the person who has to receive the money –

• Enter your virtual ID.
• Select to collect payment.
• Enter payer’s virtual ID.
• Confirm payment details.
• Payer will get transaction request notification.
• Once payer verifies transaction by entering his M-PIN, the amount will be credited to your bank account associated to the virtual ID used.

If you are the the payer –
Initiate the transaction by entering the recipient’s virtual ID, Recipient will have to confirm the transaction.
Amount will be credited to the recipient’s bank account.

For online shopping

• As a buyer you select UPI as payment mode
• You enter your Virtual ID and M-PIN in the app.
• UPI server checks buyer credentials and confirms or declines transaction.
• If transaction is confirmed, UPI server sends message to the bank.
• Amount is debited from buyer’s account and credited in the bank account of the shopping portal.

Where can I use UPI now?
Currently, UPI is available only for Android phones. You can use it for –

• Person to person funds transfer up to ₹ 1,00,000
• Flipkart has tied up with Yes Bank to offer UPI payment facility to its customers.
• It is expected that it will get integrated with other mobile platforms and organisations such as insurance companies will offer UPI as a payment mode.

How does it compare to other modes of transaction?
In cash payments, you need hard cash. UPI scores here as no hard cash is required.
For card payments, you need to have the card in your hand. Moreover the merchant requires a card reader. In UPI, there is no such restriction.
In online transactions using cards, you need to type in a lot of details like card number, expiry date, CVV number, OTP etc. UPI is relatively simpler.
In NEFT payments, bank details are required. There are restrictions related to non-banking hours, holidays etc. There are no such issues in UPI transactions. They can be done 24×7 all through the year.
Mobile wallets are more sophisticated and have more security compared to the UPI mechanism. UPI might help mobile wallet systems to be more interoperable. UPI and mobile wallets can work hand-in-hand.

Why is UPI important?
UPI is a step towards a cashless economy. Cashless transactions help arrest black money transactions, tax evasion and create a trail for transactions.
UPI is a convenient mode for transactions. People need not carry huge amounts of cash. There is no threat of loss/theft of cards, cash, wallet etc.
Real time money transactions will boost the e-commerce business in India too.

UPI is still in its initial phases. Watch out this space to read more about updates on UPI.