Imagine a situation where you are out with your friends for a contributory dinner party and realise that you have forgotten your wallet back home - no cash and, worse still, no access to plastic money either. It could be even more awkward and embarrassing if the gathering has a few unknown faces in friends-of-friends. After all, first impression matters.
Well, come June, your closest companion - the smartphone - could come to your rescue. An instant money-transfer and -sharing app is in the works under the aegis of the National Payments Corporation of India (NPCI), and closely monitored by the Reserve Bank of India. And, the Unified Payments Interface (UPI) app, experts say, will change the online payment solution landscape in India. In a nutshell, it will allow all the functions of a debit card or Internet banking in a more secured environment.
UPI is a payment system that allows you to transfer and receive money round the clock without mentioning the details of your bank accounts, such as the account number and IFSC codes, and, instead, uses a virtual ID for all transactions. According to NPCI, while as many as 29 banks have concurred to provide UPI service to their customers, 21 banks, such as SBI, have already joined the UPI as payment service providers.
Their services are expected to be available within the next two months. If you have two or more bank accounts, you have got to create as many ids and later consolidate all into one. Banks are in the process of either upgrading their existing apps or launching a new UPI-enabled app.
"We believe that UPI is going to be the next-gen product. It will accommodate three to four new features, which will make it dramatically different from the apps we use today. It allows interbank and inter opportunity in mobile payments, virtual payment address, simple checkout, etc.," says Dilip Asbe, COO, NPCI. One can even use this app to make a request for peer-to-peer payment.
UPI is unique in many ways. It provides a single-click two-factor authentication solution for subsequent transactions and can also help people split the bill amount among friends, apart from a host of cashless payment options, including paying insurance premium, donations, collections, disbursements and merchant payments.
And all this will be available through a single UPI-enabled bank app, which is fully secured because it complies with the two-factor authentication system recommended by the Reserve Bank of India.
How is it different?
The interface will identify a bank customer with an email-like virtual address - if a State Bank of India customer's virtual id is ABC, the virtual address will be ABC@sbi. He or she can also be identified through the phone number. For example, if the phone number is 1234567890, the virtual address will be 1234567890@sbi.
According to NPCI officials, the RBI has allowed the banking space to use UPI for the time being, and mobile wallets, such as Paytm, may be allowed to upgrade their systems at a later stage. If the individual, or individuals, are not registered as a UPI user, then NPCI will convert push payment transactions into Immediate Money Payment Service or IMPS. The UPI app supports all features of IMPS.
"India is a big market and all payment modes will exist and consumers will have choice of all. I believe that wallets will be as popular as today even after UPI," says Asbe.
You can also use a desktop computer to transact using the UPI, but will have to keep the mobile phone within reach because you would receive all the notifications, including one-time passwords, or OTPs, on your mobile to complete the transaction.
"In my personal view, there wouldn't be any impact on wallets due to UPI. India is a huge market and the scope for tapping electronic payments is about 20 times. All payment systems such as credit and debit cards, wallets, UPI and IMPS is expected to grow for the next three to five years given the vast market size. Wallets have done a great job over the past two years and the UPI initiative will support bank accounts to get similar user experience of wallets. Consumers will get benefited with so many electronic payment options, and his choice shall prevail in due course," adds Asbe.
How it works
Login to your bank-enabled UPI app and select the sending money/payment option. Enter the recipient's virtual ID, the amount and the account number the fund will be debited from. Once the confirmation screen to review the payment details appears on your screen, enter the M-PIN and then click to confirm. The app will display a payment confirmation or decline message.
- UPI will network all banks through one single app
- NPCI will cost 50 paisa for each transaction
- Need not share bank account details with others
- UPI-enabled platform allows transfers for up to Rs 1 lakh
- Consolidate all your bank accounts
- NPCI is a not-for-profit Indian company; hence data stays within the country
To receive money, you have to log in to the app and select the collect money or request for payment option. Enter the virtual ID of the person you are requesting payment from and the amount to be credited. Soon, the confirmation screen with payment details will appear on the screen.
Once you click the button, the payer will get a transaction request notification on his mobile. Once the other person verifies the details and authorises the payment by entering his M-PIN, the amount will be credited to your account.
Bill and Premium Payment
Your insurance company will set off the premium-payment process. Once you accept the request and authorise the payment, the amount will be transferred to the company's account. The insurance company may also be allowed to send an early premium payment notification, and all that you have to do is click the pay-by-date or accept button.
Once the payment is made you will get an alert on your registered mobile number. The same process will be followed for all other merchant transactions and bill payments.