Imagine paying for everyday purchases directly from your bank, without the need for carrying cash. The RBI's new interface helps you do just that
Reserve Bank of India Governor Raghuram Rajan launched the much awaited Unified Payments Interface (UPI) system, as its latest offering in boosting digital money transfers. The interface has been developed by National Payments Corporation of India (NPCI), the umbrella organisation for all retail payments in the country. The UPI seeks to make money transfers easy, quick and hassle free. It's being hailed by many as one of the biggest changes to take place in the financial sector, but what is the UPI, and what does it mean to you? Here's a quick guide to everything you need to know about the UPI:
What is UPI?
UPI is a payment system that allows money transfer between any two bank accounts by using a smartphone. It is a system for instant, online bank payment, which will help India to move towards a cashless economy.
What can a user do with the app?
UPI allows a customer to pay directly from a bank account to different merchants, both online and offline, without the hassle of typing credit card details, IFSC code, or net banking/wallet passwords.
Who is behind UPI?
Unified Payment Interface is an initiative by National Payments Corporation of India’s (NPCI), set up with the support of the Reserve Bank of India and Indian Banks Association (IBA). The NCPI operates the Rupay payments infrastructure – 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 to Use UPI?
To send money to someone, you need to know only their UPI ID - a virtual identity like an email address. This could be your name, or your phone number, so for example, if your phone number is 1234567890, then your virtual address could be 1234567890@sbi (if your bank is SBI) or 1234567890@axis (if you're an Axis bank customer), and so on.
How is it better than just using my Card??
Cards are a hassle to type on phones, and transmitting card data brings its own security problems. UPI bypasses all of these.
But won't the merchant get my Bank Account Details??
UPI brings this awesome idea of "Virtual Payment Address"
You only give your merchant this address, and they can store your payment details against this. They never even get to see your bank account number.
Bank account not required
If you don’t have bank account then also you can install any bank app and send/receive money in your app from anybody who has UPI enabled app.,/p>
This does not require having bank account for anybody who want to transfer and get the money i.e. You should have smartphone, install Bank Mobile App like for HDFC- payzapp, ICICI - Pocket etc. register with your mobile number, GET unique UPI-ID and start banking.
Now Transfer money between different banks
With UPI you would be able to transfer the money from one HDFC payzapp to another ICICI pocket app - This is the essence of UPI.
No need to Exchange Sensitive Information
It works as a single identifier that will eliminate the need to exchange sensitive information such as bank account numbers during a financial transaction.
UPI eliminates the need of knowing the recipient's name, their bank account number, and IFSC code (or bank branch)
Because it's using the phone to verify transactions, UPI is secure - someone else can't just enter your ID and spend your money.
Anyone could become a merchant
Anyone can also use the UPI to send a request for money, like an invoice. This means that anyone could become a merchant, and take payment for any goods or services from your account to their account.
- UPI payments can be used for:
- Paying to Cash on Deliveries.
- Merchant transactions at Physical/e-commerce stores.
- Making IMPS alike payments without the need of knowing Bank A/c or IFSC's.
- Allows merchants cash settlements in real-time.
- Pay utility bills, insurance premiums.
- Transfer money to friends and relatives
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 micro payments cashless which will benefit both buyers and sellers.