UPI - Bringing Digital Payments to The Indian Masses

Indian society has gone through various economic structures – from a historic era where there was a fair level of equality between classes to a time when the lower classes faced many hurdles while participating in the formal economy. Even today, the economic divide in India is quite visible.

An Oxfam survey revealed that the wealthiest 1% of India’s population controls 50% of the wealth of the county, while only 1% of the wealth is in the hands of the bottom 50%. An economic divide this drastic is seen in only one other country in the world – South Africa. India also makes the list of the top-5 countries for both the maximum number of billionaires and the maximum number of people living in poverty – another proof of the disparity in India’s social classes.

In these circumstances, introducing India’s population to a new and innovative payments infrastructure is touted to be a game-changer; one that is expected to boost the participation of all economic classes in the country. Thanks to the contribution of the Indian government in driving new payments platforms forward, and the bright talent that brings these initiatives to fruition, the landscape seems to be shifting towards a technically advanced infrastructure that is conducive to narrowing financial barriers and making the digital-payments technology more inclusive.

The current landscape of India's payment structure

Over the last few years, India’s mobile payment infrastructure has undergone massive improvements, in terms of availability and prominence, over non-digital forms of currency. This infrastructure includes mobile banking on smartphones and mobile wallets such as PayTM and PhonePe.

This improvement can be because smartphones are becoming ubiquitous in the Indian market and businesses are offering options of digital payments more readily, as consumers move towards electronic transactions. The ease of holding assets in mobile wallets makes it much more convenient than cash transactions, which could require frequent trips to ATMs.

What is UPI payment?

As India doubles down on its ambitions of embracing the cashless revolution, we see the advent of a new technology - the Unified Payment Interface - allowing individuals to utilise their smartphones as virtual debit cards to carry out instant transactions.

UPI was launched in 2016 and can be thought of as an identity card for financial transactions. Using IMPS (Immediate Payments Service), UPI allows you to send and receive money using unique identifiers called Virtual Payment Addresses. This removes the hassle of carrying debit or credit cards or trading details such as bank account numbers or IFSC bank codes.

UPI allows 24x7, instant money transfers between accounts of different banks, achieving the goal of interoperability. You can operate all your multiple bank accounts through a single UPI app and can add payees immediately. In a typical bank transfer, one has to wait for new payees to be added to the system before transferring money. 

Guide to UPI - Setting up and using it for transactions

There are multiple UPI apps that you can download on major smartphone-app marketplaces, including for iOS and Android. To sign up for the service, you must first get a UPI app such as the BHIM Kotakpay app, ICICI’s iMobile, SBI Pay, or HDFC Mobile (you are not restricted to using just your bank’s app) and register as a user. As part of your registration, you can connect your bank account to the UPI and set your UPI PIN. This is a 4-to-6-digit passcode that you will use to authorise transactions, which adds a layer of security to the mechanism.

As opposed to a mobile wallet, the UPI app does not require you to transfer money into it from your bank account.

Instead, it directly debits from, and credits amounts into your linked account.To use the app to initiate a transaction, open the app and specify a receiver using their virtual payment address. Enter the amount, confirm the deal using the UPI PIN, and voila! The funds are immediately transferred!

With the clear ease and convenience that the UPI platform brings to peer-to-peer payments and transactions, it comes as no surprise that the adoption of UPI among the Indian public has been seeing a steady rise over the past few months.

In addition to being used to pay for goods and services from merchants, UPI is also a convenient method for transferring funds between people (subject to daily and per-transaction limits that vary from bank to bank) where the sender only needs to know the virtual payment address of the receiver.

Conclusion

With platforms like PayTM and PhonePe bringing more consumers to the world of digital payments, and initiatives such as UPI reducing the entry barriers and making the payment infrastructure stronger, the future of digital payments in India looks promising.

With its ease of setup, built-in security, and availability across smartphones and various banks, UPI seems to be well poised to see massive adoption by Indian consumers.

Courtesy:

https://www.enterpriseinnovation.net/article/digital-cash-dominate-indias-payment-landscape-2022-1427886391

https://www.profitbooks.net/upi-unified-payment-interface/

https://onlineaccountopen.in/

https://upipayments.co.in/upi-payment-system/#Which_UPI_App_should_I_Download