Understanding the Functionality of UPI
- Peter Johnson
- Dec 5, 2023
- 2 min read
Exploring the Processes Behind India's Digital Payment Revolution
The launch of Unified Payment Interface in 2016 was an immense game changer in the world of digital payments in India. From its initial introduction of just 21 banks to the current total of more than 345 banks doing a stunning 10,72,792 crore transactions by August 2022; UPI's simplicity, security, and versatility can be largely attributed to its colossal success. It became a defining moment in India's financial history, all thanks to the then RBI Governor Dr. Raghuram G Rajan's vision.
The cleverness of UPI is in how it has been able to make digital payments more straightforward and safer. It offers customers the possibility to join numerous financial accounts to one single mobile platform, enabling Peer-to-Peer (P2P) as well as Peer-to-Merchant (P2M) transfers. UPI's popularity originates from the numerous advantages it presents:
The PUSH mechanism of UPI's transaction process involves initiating the transfer from the sender's side.
The following is an outlined workflow:
Step 1: Installing a UPI-enabled app on a smartphone is the first step.
In Step 2, the user establishes a Virtual Payment Address (VPA) within the app. This particular VPA is linked to their bank account and serves as a distinct identifier.
Thirdly, the trader creates a QR code containing their Virtual Payment Address info.
Step 4: Utilize a UPI app to scan the QR code, which then extracts the payment details from the code.
Step 5: After confirming the payment, the person should enter their UPI PIN.
Step 6: The UPI app sends a request to the National Payments Corporation of India (NPCI) to make a transaction.
At Step 7, the NPCI sends the transaction request to the user's bank.
The transaction is then authorized by the user's bank.
Step 9: NPCI sends out a message of confirmation to both the user's bank and the merchant's bank.
In the tenth step, the user's bank will then send the funds to the merchant's bank.
Step 11: The merchant is informed of the payment.
At Step 12, the UPI app will present the user with a notification informing them that their payment has been completed. technology, services, and interfaces.
The ecosystem of UPI consists of three essential elements: technology, services, and interfaces. include promptly addressing any allegations of non-compliance.
Under the UPI Framework, action must be taken without delay in regard to any claims of not abiding by the rules.
The versatility of UPI enables a great range of transactions, from transferring funds to settling bills. Its design is focused on convenience, making it possible for users to execute money transfers using contact facts, VPA, or QR codes, besides performing other banking related activities.
UPI encourages cooperation between various financial institutions, payment platforms, and software programs, such as bank agnosticism, the 99# Service, and UPI AutoPay for regular payments.
It is anticipated that UPI will have a groundbreaking effect on India's money-related system, creating a single, secure platform for conducting all transactions. The transition of UPI from an incipient system to processing billions of dealings highlights India's technological advancement. Knowing how UPI works, its advantages, and its protective protocols is vital for carrying out safe and effortless payments.
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