Early this year we reported that Whatsapp had started accepting payments via UPI. Prior to that, Amazon had started doing the same. UPI is in the news for the release of its next iteration – UPI 2.0. Staying true to our claims of not just providing a quick personal loan but also sharing all the latest in millennial-friendly finance related topics.
Before we look at the features of UPI, however, let’s take a glance at what the first iteration of UPI had to offer.
United Payments Interface
Unified Payments Interface, or UPI, is a single window mobile payment system that was created by National Payments Corporation of India (NPCI). It is regulated by the Reserve Bank of India which facilitates the instant fund transfer between two bank accounts, over a mobile phone network. Any bank can use UPI by integrating it into their existing smartphone applications. Banks can also develop their own UPI app.
The objective of UPI is to offer architecture to facilitate online payments – thanks to the smartphone boom. It is expected to improve instant payments via mobile – providing security and convenience. This security is to be achieved using facets such as Aadhaar integration, secure credential capture, 1-click-2-factor authentication (one-click transaction which is authenticated at two levels), phishing protection and Virtual Payment Addresses. UPI thrives to make the application as simple to use as making a call from your phone. UPI needed to be innovative in such a way that both the payer and payee stay on their smartphone, taking advantage of newer authentication services and enhancement in mobile devices. UPI needs to be scalable to billion users and also be adoptable by the Indian population.
Anyone who uses a smartphone, and operates a bank account, can benefit from UPI either for transferring or receiving money. Currently one needs a bank’s IFSC code to be an identifier of your financial information, but with UPI all you need is a virtual address – that is unique and conceals your financial information.
UPI is built over the Immediate Payment Service (IMPS) facility for transferring funds using a virtual payment address, account number, mobile number, Aadhaar and MPIN (Mobile banking Personal Identification Number). These are required for customer verification and payment confirmation. UPI is a system designed to provide a simple, secure and convenient ‘single interface’ to enable sending and receiving of money using smartphone, via a ‘single identifier’. The identifier can be a virtual address like an email ID, mobile number or Aadhaar.
UPI enabled banks are those which facilitate fund transfer through the UPI payment system. These banks let their bank accounts to be linked with the UPI based app. If you, as a bank customer, link your account to the UPI app, the bank would then be your UPI enabled bank. UPI consolidates and integrates multiple systems with varying service levels into one nation-wide platform for all retail payment systems.
In total, there are 3 types of UPI enabled banks based on the function they perform. They are:
Banks with UPI app
Most banks fall in this category. These banks have either developed a new UPI app or have integrated the UPI in their existing mobile apps. Examples of banks with their own app are ICICI Bank, Axis Bank, State Bank of India, HDFC Bank, PNB Bank, etc.
Banks without an UPI app
Some banks have neither developed its own UPI app, nor partnered with a third-party app. The Bank of Baroda is one such example.
Banks with third party UPI app
Some banks have lent their UPI system to other mobile app developers. Yes Bank is one such bank, and has partnered with several third parties.
Features of United Payments Interface
UPI allows a customer to pay directly from a bank account to different merchants – offline and online, both.
UPI does not involve the hassles of typing in account details, IFSC codes or net-banking/wallet passwords every single time you want to initiate a transaction.
- UPI is also being provided as a USSD. Users can access the service by dialing the code *99#
- The interface was intended to enable Peer-to-Peer (P2P) immediate payment via a single click two factor authentication process
- It is expected to facilitate push (pay) and pull (receive) transactions, and even works for payments via barcodes
- UPI is also envisaged to aid in multiple recurring payments for salaries, utility bill payments, school fees, etc.
- UPI is safe for customers as they only share a virtual address and do not have to share their personal information for each transaction
- It is open sourced, cheap, secure, reliable and instantaneous
Currently, prepaid wallets cannot support more than Rs. 20,000 worth of transactions in a month. But, a UPI enabled bank account can transfer up to Rs.1,00,000 per transaction.
Better accessibility is achieved, because one mobile application can be linked to different bank accounts. Complaints can be raised directly from the app.
United Payments Interface 2.0
As per industry reports, the approximate transactions performed over UPI was 235 million, by July. On August 17 2018, a new version of UPI was officially released in Mumbai. You can always read more about UPI 2.0 over BHIM’s website. Some features mentioned in brief are:
UPI 2.0 is set to feature a one-time mandate with block functionality. This allows a user to pre-authorize a transaction. This hence creates a mandate where the transaction amount is blocked by the bank. The actual debit only happens when the merchant completes the transaction, allowing users to earn interest till the time. The amount that is blocked can be automatically available if the merchant does not choose to exercise the mandate or cancels it. The functionality also adds a pre-authorized debit feature to UPI. This feature is currently being monitored by capital markets regulator SEBI, who plans to included UPI as a payment mode for IPOs (initial public offerings).
Users can now possibly link their overdraft accounts on their UPI apps. They can also transact within an applicable pre-approved overdraft limit on the account.
UPI 2.0 enables merchants to attach an invoice along with the transaction. This allows the user to view check the details first before approving the payment. The transaction history is made available for up to 2 months from the transaction date.
Payment instructions can be now pre-filled with transaction details including the merchant VPA. The amount is then transmitted to the payee’s mobile phone through a QR code or other modes such as Bluetooth and audio. The QR code scanning adds a layer of security which helps in escaping any skimming tactic by a fraudster.
The daily transaction limit per user is now set to Rs.2,00,000. Compared to UPI 2.0, Whatsapp’s daily spend limit is at Rs. 5,000 with BHIM app allowing up to Rs. 40,000 of spending per day. Payments can now be scheduled to any later date.
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