It is regulated by the Reserve Bank of India (RBI) and can be supported by any bank in the country. As of 2020, more than two hundred banks support UPI, and 2334.16 million transactions happen every month.
The easy-to-use and cheap payment system leverages the massive smartphone penetration in the country and serves as a reliable payment system for digital India. This article looks at how UPI works, where it is used, and what’s in store for the future.
How UPI works
UPI was intended to be just a platform that third-party client apps can utilize to foster innovation and create the best user experience. It meant that consumers had access to a wide range of apps like PayTM, GPay, and PhonePay, which worked on the UPI platform.
Each app can access the platform and make transactions, but they also offered unique features. For example, some offered more cashback opportunities than others for digital payments.
Once you’ve installed a client app, you just have to register your bank accounts on the app, and you’re good to go. UPI allows money transfers to occur via virtual payment addresses, phone numbers, and AADHAR numbers linked to the bank account.
UPI is based on the Immediate Payments Service (IMPS) system, which was the previous standard for the real-time digital bank transfer in India.
With IMPS, you had to enter the receiver’s bank account details to send the money, while with UPI, all you need is a virtual payment address. IMPS also required you to follow multiple steps to verify a bank account on the system while UPI verifies a payment address instantly. In many ways, UPI is considered the spiritual successor to IMPS.
The interface also allows payment requests which can be accepted or declined via the client app. Payment requests allow UPI to function in the business and e-commerce sphere too as companies can send payment requests directly to the customer’s virtual payment address.
How UPI is used
There are mainly two areas where UPI is used:
For personal digital transactions.
For business and e-commerce transactions.
When UPI was initially introduced, it was a free service which meant users could send funds instantly for free and conveniently.
By August 2020, some banks started levying charges for using the platform beyond a certain number of free transactions, but the costs are still meager. Naturally, this led to massive adoption in the personal transaction section. IMPS became an antiquated system eventually due to UPI’s usage and caused digital payments to become the norm in the country.
In terms of business and e-commerce, UPI again played a huge role in the last few years. Major e-commerce platforms like Amazon and Flipkart support the platform as consumers only have to enter their easy-to-remember virtual payment addresses and not bank details or card numbers.
Digital financial services like online trading brokers and e-wallets also utilize UPI. In the iGaming industry, several online casinos utilize UPI to facilitate easy transactions for their customers along with online poker sites and fantasy sports apps. The additional information you can find on the INDIA CASINO INFO site. Click here to read more.
UPI has helped bring forward the modern digital era in the country, along with cheap fast internet access and smartphones. The platform continues to be developed, and there are talks of incorporating an offline payment feature using NFC. As India continues to get digitalized, UPI will be an essential part of its digital infrastructure.