The next big thing in online payment method is just around the corner with the introduction of Unified Payment interface (UPI), which the experts claim is a major step in moving towards a world of cashless money transactions.
WHAT IS UNIFIED PAYMENTS INTERFACE?
In simple language, UPI is a payment system that allows a customer to transfer money between any two parties. An advanced system of Immediate Payment Service (IMPS), Unified payments Interface(UPI) is an alternative to mobile wallets which will make the digital payment mechanism faster, smoother and easier for millions of Indians, who are daily sending money, paying bills and buying goods on the internet. Created by National Payment Network Company (NPCI), with the support of Reserve Bank of India, Indian Banks Association and Rupay, UPI empowers the customers to make transactions through mobile phones without the need of debit, credit cards or net banking.
HOW DOES IT WORK?
All that a customer needs is a smartphone with UPI enabled application to make online payments seamlessly through this interface. Gone are the days when a customer goes through multiple steps of typing in the card details, CVV, OTP etc.. With UPI, all that a customer needs is his virtual payment address and the MPin to conduct and authenticate a transaction.
Let’s understand how the interface works through this simple example:
Banks have already started working on integrating the Unified Payments Interface along with their existing mobile applications to provide the benefits of UPI its customers. And that brings us to the next most obvious question.
WHAT BENEFITS DOES UPI ENTAIL?
INTRODUCTION OF UNIQUE VIRTUAL PAYMENT ADDRESS
UPI is a welcome change for the customers as it removes the hassle of typing the card details, netbanking/wallet password while making an online transaction. Instead, every customer has a virtual identification address (somewhat like Rakesh@hdfc.xyz). This virtual address will be unique to each customer and at the same time will also hide the customer’s bank details from the merchant.
1-CLICK 2 FACTOR AUTHENTICATION THROUGH MPIN
The 2 Factor authentication process will still remain in place but instead of waiting and receiving every time a one-time password(OTP) for each transaction, the users are able to authenticate the transaction just by using the MPIN, which every customer receives when they sign up for mobile banking with their respective banks.
A MORE SECURED SYSTEM
UPI is beneficial for the banks as well as it is more secured than the present payment system, because all the transactions take place at server level only now instead of being redirected to other pages and services.
SUPERIOR MOBILE EXPERIENCE TO CUSTOMERS
Payment Service Providers (name given to the registered banks) can provide a better mobile experience to the customers as the interface will remove the various steps of typing in the card details, CVV, OTP etc and instead the customers will be able to make the transaction just by providing their virtual address and secured MPin for authentication purposes.
COST EFFECTIVE MECHANISM
With mobile phone number being used as an authentication device, use of virtual payment address and use of third party authentication schemes such as Aadhaar, UPI allows both issuance and acquiring costs to be brought down.
UPI is being seen as an important step towards the effective implementation of JAM (Jan Dhan Yojana, Aadhar and Money) trinity which Finance Minister Arun Jaitley spoke of during his Union Budget presentation.
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Blog credits — Shaharyar Zaidi