Unified Payments Interface (UPI) Seminar Report | PPT
What is Unified Payments Interface (UPI)?
Unified Payments Interface (UPI) is an instant real-time payment system developed by the National Payments Corporation of India (NPCI) facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform. Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience. Each Bank provides its own UPI App for Android, Windows and iOS mobile platform(s). Unified Payment Interface UPI is expected to play a major role in achieving goals of universal electronic payments, a less-cash society, and financial inclusion. Unified Payment Interface is an initiative by the National Payments Corporation of India (NPCI), set up with the support of the Reserve Bank of India and Indian Banks Association (IBA). The NCPI operates the Rupay payments infrastructure that – like Visa and MasterCard – allows different banks to interconnect and transfer funds.IMPS (Immediate Payments Service) is also an initiative of NCPI. UPI is the advanced version of IMPS.
How Does Unified Payments Interface (UPI) Work?
The Unified Payment Interface (UPI) envisages a payments architecture that is directly linked to achieving the goals of universal electronic payments, a less-cash society, and financial inclusion, using the latest technology trends, laid down in the Reserve Bank of India (RBI) Payment System Vision Document (2012-15).
UPI is built over Immediate Payment Service (IMPS) for transferring funds. Being a digital payment system it is available 24*7 and across public holidays. Unlike traditional mobile wallets, which takes a specified amount of money from user and store it in their own accounts, UPI withdraws and deposits funds directly from the bank account whenever a transaction is requested. It uses Virtual Payment Address (a unique ID provided by the bank), Account Number with IFS Code, Mobile Number with MMID (Mobile Money Identifier), Aadhaar Number, or a one-time use Virtual ID. An MPIN (Mobile banking Personal Identification Number) is required to confirm each payment.
According to NPCI, so far 30 banks have agreed to start this service. If your bank is UPI-enabled, you can ask it to connect you to the system. To initiate a transaction, you can use two types of addresses—global or local. The global address includes your mobile, Aadhaar, and bank account numbers. A local address can be a virtual address. Let’s say your bank gives you a virtual ID similar to your email ID (for instance, name@companyname). This virtual address will allow you to send and receive money from multiple banks and prepaid payment issuers.
So, you will no longer need to use a particular app to send and receive money. For example, if you use a taxi service, at the end of the journey you just have to give your virtual address and the driver will request money from it. You will get a message on your mobile phone asking for authentication. Once you authenticate the transaction by entering your password, it will be complete. This process doesn’t require either the driver or you to share bank details. Since UPI runs on IMPS, the service will be available in real time and 24x7.
Mobile first
It’s one of the few systems in the world designed for the new mobile age, helping with easy integration across various platforms.
Interoperable OTP (one-time password) generated on one bank app can be used across another for transaction authentication. Also, multiple levels of identifiers can be used (bank account, Aadhaar number, virtual identifier, mobile number, etc) to send or receive money. Biometric integration gives a second-factor authentication, securing your account like none other in the market.
Recurring payments
Payment Support Providers (PSPs) can provide an add-on for easy-to-do recurring payments on top of UPI. Application Programming Interfaces (APIs) are going to be a game changer—they will ensure a level playing field that will allow even a small start-up to do what big companies can.
UPI ecosystem
Level 0
People who build the UPI switch. A switch handles authentication and communication between the issuing and acquiring banks. ‘Generation Two’ switches were card machines on the merchants’ premises; authentication was handled by the machine and the bank customers’ private PIN was keyed into the merchant’s machine and needed an expensive leased line to operate. ‘Generation Three’ switches are UPI ones—they enable customers to key in PIN/OTP (one-time password) on his/her smartphone, while authentication happens centrally. One big worry is how to get banks to agree to connect to the switch.
Level 1
Those who connect to the switch. In UPI’s case, they are called PSPs. (Old players were called Payment Gateways but these are now passe.) There will be many PSP builders—some inside banks, many outside as start-ups and merchants. Banks and customers are free to engage with multiple PSPs. The bank may have costs associated each time, while customers will only need to note down different addresses that will be associated with their identities on different PSPs.
Level 2
They connect to the UPI PSP, Visa/Master Card networks, RuPay or International payment gateways. They have to manage the user experience from the card to transaction completion.
Level 3
They are called on-boarders. They have to sign up new UPI, or new wallet, customers. On-boarding has high failure rates and lots of clever hacks go into making that less painful.
Level 4
They are the application guys. They bring new cash-out (e.g. recharge players like PayTM), cash-in (e.g. Eko) and social payments (e.g. MyPoolin). In the future, this is where the action will be. They have to be a destination site or integrate into existing payment experiences.Enablers Innovative authentication collectors, E-sign, and digital consent are third-party systems that are needed by Level 1-4 people.
Source: iSpirt
AEPS
An NPCI product, the Aadhaar Enabled Payment System (AEPS) offers instant, 24X7, interbank electronic fund transfer service through mobile phone. It allows Aadhaar biometric authentication-based transactions from a bank account that is linked with the Aadhaar number.
APBS
The Aadhaar Payments Bridge System (APBS) is a system allowing remittances to be made to an Aadhaar number without providing any other bank or account details. It uses the NPCI central mapper as a part of National Automated Clearing House (NACH) to enable government user departments to electronically transfer subsidies and direct benefit transfers to individuals on the basis of their Aadhaar number. Currently, the NPCI central mapper has about 160 million Aadhaar to bank mappings in its database. As part of the large-scale adoption of Direct Benefits Transfer (DBT) across all subsidy systems, it is expected that mapping database will have about 200-250 million Aadhaar mappings within next 12-18 months.
PSPs
Payment Support Providers (PSPs), as defined by RBI, collectively cover all RBI-regulated entities under the Payments and Settlement Act of 2007. These include banks, payments banks, PPIs, and other regulated entities. In addition to the Aadhaar and the mobile number as global identifiers (mapped by NPCI), PSPs can offer any number of virtual addresses to customers so that they can use the virtual address for making and receiving payments.
IMPS
Immediate Payment Service (IMPS), launched on 22 November 2010, is now available to the Indian public from over 65 banks.
USSD service
UPI is also available as a USSD service where users can access the service by dialling the code *99#. The various services provided in USSD mode are categorized as follows:
Financial Services
--Fund Transfer----Send Money
----Request Money
Non-financial services
-- Balance Enquiry--Change MPIN
NPCI
National Payment Corporation of India
UIDAI
The Unique Identification Authority of India (UIDAI) which issues digital identity (called Aadhaar number) to residents of India and offers online authentication service.
Conclusion
UPI is a great step in right direction and it is set to become an efficient alternative to mobile wallets and make cashless payments faster, easier and smoother for millions of people in India. It has potential to make micropayments cashless which will benefit both buyers and sellers. Please feel free to ask questions or share your thoughts in comments section below.
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