The changing face of money, from cash to ‘Unified Payments’

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Once upon a time, making a payments used to be simple. One paid by cash or card. It changed overnight in November 2016, when the monster of demonitization was unleashed. Eighty six per cent of the cash was sucked out of the system, plastic helped in a limited way as the neighbourhood vegetable vendors did not accept cards. Fortune shone on m-wallet companies but not for long for multiple reasons.

Enter UPI – or Unified Payment System.  Though the system has been in place since mid-2016, it did not have any traction as the duo of cash and card answered all our payment needs. But, the combined effect of cash shortage and a government push has brought UPI in the forefront. The number of UPI transaction across platforms including banks, BHIM, PhonePe, Paytm, Google Tez reached almost half the value of debit and credit cards swiped at stores in March 2018.

So what is UPI?

The simple answer – it is like an e-mail ID for your banking transactions from your mobile phone.

Technical answer – it is a payment system that allows you to transfer money between any two bank accounts through a mobile phone. It lets a customer pay directly from a bank account to different merchants, both online and offline, without going through the trouble of typing credit card details, IFSC code, or net banking/wallet passwords.

Is it better than debit and credit cards?

Everyone has experienced the hassle of typing 10-digit card numbers on small screens. And then there is the security issue of transmitting card data on airwaves. UPI needs only one ID. And since it runs on IMPS, it’s instantaneous and 24/7.

What is this ID?

It’s called a Virtual Payment ID and will look like The merchant only sees this ID. So at the end of a taxi ride, you don’t need to ensure money in your m-wallet or app. Simply give this ID to the driver. Once he feeds the ID, you get a message asking you to authenticate it. It negates the need for account number or ensuring money in the virtual wallet.

Is it accepted widely?

Amazon and Jet Airways have already integrated UPI into their apps in order to take payment from customers. You will see UPI as an option to when on the payments screen of Ola, Big Bazaar, Paytm. Facebook is piloting a payments service in India with a UPI backbone for its WhatsApp Pay. With its growing acceptance in the peer-to-peer payments, more retailers are jumping on it.

Who owns UPI?

Developed by National Payments Corporation of India (NPCI) it is regulated by the Reserve Bank of India.


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