Unified Payments Interface

By AP HOTA MD, National Payments Commission of India

Unified Payments Interface (UPI), a new process in electronic funds transfer, will be inaugurated by Reserve Bank of India Governor Raghuram Rajan on April 11. Conceived and being implemented by National Payments Corporation of India (NPCI) under the guidance of former chairman of Unique Identification Authority of India (UIDAI) Nandan Nilekani, this mode of payment is likely to be as transformational as Aadhaar when it gets adopted by most banks.Initially, 29 banks are likely to adopt it, and certification is already in progress for 12 banks. Other banks will join soon.
The process will ride on the existing infrastructure of Immediate Payments Service (IMPS), which facilitates money transfer from any bankwallet account to any other bankwallet account as permitted by RBI “instantly“ 24x7. UPI enhances the user experience of IMPS with some additional processes. Firstly, UPI enables `instant collect', which was not possible under IMPS. It addresses the current problem of about 30% decline in e-commerce payment transactions due to a complicated transaction flow. With UPI, the friction gets minimised and e-commerce market players can pull money from shoppers easily .
Cash on delivery (COD) transactions can also be completed by the delivery staff by collecting money electronically while delivering the goods. A biller can collect bills from consumers by automating the collection process on the due date, supplementing thereby the already existing ECS (debit)NACH (debit) process. Clubs,schools can collect periodic fees. A daughter can now make a UPI request to her father's account and the father, recognising that the request has come from a valid source, can authorise the transaction or even reject it. The father can also “hold“ the transaction for verifying the transaction before authorising it with a one-time password (OTP) or static PIN. The landlord can pull the money from the tenant. There can be multiple usage of such nature for online face-to-face payments.
Secondly , UPI has a facility to identify a bank customer with an email-like virtual address. A customer can create a unique financial address in his/her bank linked with the bank account number at the backend. The customer will use only the virtual address while dealing with others without sharing the account details. For in stance, a customer at State Bank of India (SBI) can create an ad dress like shortname@ sbi or mobile number@sbi. Looking at the domain name sbi, NPCI will route the transaction to SBI and SBI will apply the credit/debit by resolving the virtual address to the account number. A customer can have multiple virtual addresses for multiple accounts in multiple banks.There is no account number mapper anywhere other than the customer's own bank to ensure privacy of customer data.The advantage of such an approach is the customer can freely share the financial address to others.
Thirdly , UPI will operate primarily on smartphones, leveraging their ever-increasing utilities. Though the current base of smartphones in India is about 300 million (December 2015), the number is likely to touch 400 million in two years.This will help customers to do a whole range of banking operations and shopping from the mobile itself. Smartphones will also enable banks and their certified merchants to integrate the library being supplied by NPCI so that the process of capturing the authentication information is secure and uniform across banks similar to customers providing authentication information on ATMs irrespective of bank ownership. As mobile phones get Aadhaar-ready, biometric authentication would also be possible through them.
Fourthly , UPI will enable single-click two-factor authentication with mobile itself as the first-factor using the unique hardware identification of the smartphone, and OTPstatic mobile PIN as the second. Banks will compete with each other to provide simple and user-friendly solutions without compromising on the regulatory guidelines on two-factor authentication.
A few banks are enhancing the security without compromising simplicity . For instance, the application can have a facility for the user to maintain a list of virtual addresses from which pull request would be permitted or to pre-register the beneficiaries. Banks can have applications with utilities to remind when bill payments are due. Customers can also generate various reports on transactions made. In summary , UPI promises to be truly transformational. Let us watch how it shapes the future of payment systems in the country .

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