unified-payments-interface

What is the Unified Payments Interface? Unified Payments Interface In A Nutshell

The Unified Payments Interface is a mobile-based, real-time payment system. The Unified Payments Interface (UPI) was created by the National Payments Corporation of India to process peer-to-peer (P2P) and person-to-merchant (P2M) transactions. The interface was launched in April 2016 in conjunction with 21 member banks. In essence, the UPI is a payment system that enables consumers to link multiple bank accounts to a smartphone app and make immediate fund transfers using two-click factor authentication.

Understanding the Unified Payments Interface

The process of transferring money is seamless since users are identified by a virtual private address (VPA) which they must create to access the UPI and make payments with their smartphones. 

Each VPA looks like an email address and is unique to each user. It represents the bank account number, branch number, and username of the person sending or receiving money, with users able to hold a VPA for each of their held bank accounts. 

How does the Unified Payments Interface work?

Let’s take a look at how the UPI works in more detail.

Eligibility and account registration

To be eligible for a UPI account, the user needs a smartphone and an account with a participating bank. The smartphone mobile number must also be known to the bank.

With the above requirements satisfied, the user must download an app that supports the Unified Payments Interface. Examples include Google Pay, Paytm, Uber, and SBI Pay.

Sending and receiving payments

Inside the app, they will be prompted to create a unique virtual ID that will be used to send or receive payments. The bank will then send a one-time password to authentic the account. Once verification has been achieved, the user can set up their virtual payment address. As noted earlier, this avoids the need to manually enter bank account details and protects sensitive information.

Sending money on the UPI is called a push while receiving money is called a pull. To send money, the sender must enter the recipient’s virtual ID, the amount they wish to send, and the account from which the funds will be debited. 

The process of receiving money is somewhat different from the norm. In this scenario, the receiver selects an option within the app to collect money. Then, they enter the virtual ID of the sender, the amount to be received, and the bank account to which the funds will be deposited.

Paying merchants for products and services

To pay a merchant for products and services, the user scans a QR code on their smartphone.

There are two types of QR codes: 

  • Static – these feature in retail stores, events, or as part of advertising campaigns. They are encoded with data that allows the user to enter the amount that needs to be paid and send funds to the merchant’s bank account
  • Dynamic – dynamic codes are generated whenever a merchant needs to be paid and contain the total purchase amount and the merchant’s bank account details. Dynamic QR codes tend to be used to pay for grocery deliveries and online shopping.

Key takeaways:

  • The Unified Payments Interface is a mobile-based, real-time payment system created by the National Payments Corporation of India to process peer-to-peer (P2P) and person-to-merchant (P2M) transactions.
  • The Unified Payments Interface assigns a virtual payment address to users, which represents their bank account number, branch number, and username identification. Transactions are seamless and more secure as users avoid having to enter sensitive information when making a transfer.
  • The Unified Payments Interface also allows users to pay for goods and services using two types of QR codes on their smartphones. Static QR codes are those featured in retail stores and at events while dynamic QR codes are generated only when a merchant needs to receive a payment.

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