NPCI's UPI app goes live: All questions about real-time money transfer system answered

This is a step towards transforming India into cashless economy

FP Staff August 26, 2016 09:27:00 IST
NPCI's UPI app goes live: All questions about real-time money transfer system answered

Mumbai - National Payments Corporation of India (NPCI) on Thursday said the Unified Payments Interface (UPI) is live and currently available for customers of 21 banks.

NPCIs UPI app goes live All questions about realtime money transfer system answered

Representational image. AFP

Here are the key facts you need to know about the new payments system:

What is UPI?

UPI is an app - a payment solution which empowers a recipient to initiate the payment request from a smartphone. It facilitates virtual payment address as a payment identifier for sending and collecting money and works on single click 2-factor authentication. A government press release explains the system as follows: The product will enable money transfers – both ‘Push’ and ‘Pull’ through smart phones. According to it, the two important features of UPI are, (i) it facilitates customer convenience by eliminating the need for providing detailed account/beneficiary details, through the use of virtual address and (ii) it facilitates interoperability of person-to-merchant payments (both push and pull).

The soft launch of UPI was announced by the outgoing Reserve Bank Governor Raghuram Rajan in April this year and was under pilot run, mainly with employee-customers, for some time.

After assessing the success of pilot run, RBI had accorded its final approval for public launch of the product.

How exactly does this work? How is it different from the online payment system presently in use?

Currently to to make an online payment, first you need to add the beneficiary details, including the individual's name, bank account number, IFS code, etc. While using UPI app, these processes are not required as the identifier is the virtual payment address or the unique ID of the beneficiary. This unique ID can be your phone number tagged along with the name of your bank.

Once you have the unique ID of the beneficiary, enter the app, put the amount to be paid, unique ID and click 'send' button. The banks will have to make their apps UPI-enabled.

Also, unlike RTGS and NEFT, UPI app can be used to transfer funds 24 hours.

According to NPCI, which developed the system, the UPI app will be made available on Google Play Store by banks.

Which banks have gone live with the app now?

Customers of as many as 21 banks can avail of the app's services. Some of the banks which have gone live are Andhra Bank, Axis Bank, Bank of Maharashtra, Bhartiya Mahila Bank, Canara Bank, Oriental Bank of Commerce, Union Bank of India and Vijaya Bank, among others.

NPCI's decision was to allow only those banks with 1,000 customers, 5,000 transactions and success rate of around 80 percent during the pilot runs to go live. The threshold criteria helped banks refine their systems and procedure, NPCI said.

How is it beneficial for the customers?

It makes payments easier and quicker. As e-commerce marketplace Flipkart, which recently bought out a UPI startup PhonePe, says, "In contrast to the present payments process, which involves entering numerous account/card details and multi-level interventions, UPI will provide a highly secure hassle-free digital payments experience."

The app also provides an option for scheduling push and pull transactions for various purposes like sharing bills among peers. One can use the UPI app instead of paying cash on delivery on receipt of product from online shopping websites and can pay for miscellaneous expenses like paying utility bills, over the counter payments, bar code (scan and pay) based payments, donations, school fees and other such unique and innovative use cases.

Why is it important?

This is a step towards transforming India into a cashless economy.

According to this article, only six percent of the merchants and retailers in the country have the infrastructure for accepting card payments. So the transactions are mostly made in cash, which makes it difficult to arrest tax evasion. UPI's significance has to be seen in this context. Cashless transactions will arrest generation of black money and increase tax compliance, boosting revenues for the government.

For e-commerce companies in particular, this is likely to give a big leg-up. Announcing the buyout of PhonePe, Flipkart CEO Binny Bansal said, "Payment has been one of the biggest hurdles for mass adoption of online shopping in India. UPI has the potential of transforming the entire payments ecosystem in the country."

Moreover, as NPCI Managing Director and CEO AP Hota says, "Real-time sending and receiving money through a mobile application at such a scale on inter-operable basis had not been attempted anywhere else in the world."

(With input from agencies)

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