How will Unified Payment Interface (UPI) simplify entire mobile payment system?

Unified Payment Interface (UPI) is a payment technology developed by National Payment Corporation of India (NPCI) under guidance of Reserve Bank of India. NPCI launched Unified Payment Interface (UPI) to promote cashless transaction across the country. The key drivers to launch UPI are simplicity, innovation, adoption, security and cost.

Today if you want to send money to anyone, you need to have his bank account number and IFSC code. But by using Unified Payment Interface (UPI), anybody can pay to any person, he (payer) just needs virtual payment address of payee. UPI technology enables Aadhaar number, mobile number, card number, and account number to be used  in a unified way to send money. That means UPI technology allows you to pay anybody by providing virtual payment address without knowing the bank account number and IFSC code of bank.

What is virtual payment address for Unified Payment Interface?

For every transaction, system needs a payer account which will get debited and a payee account details which will get credited. But as said, by using UPI technology, payer does not need to know payee account details. He just need a virtual payment address which will be unique and linked to that bank account. These virtual address will be temporary in nature (time specific, amount specific or special / innovative)  and offered by the provider. All these virtual payment addresses are denoted as account@provider" form.

Example,

account-no@ifsc-code.ifsc.npci,  aadhaar-no@aadhaar.npci,  mobile-no@mobile.npci , account-id@bank-psp-code, ppi-card-no@ppi-psp-code,  user-id@psp-code, token@psp-code

* PSP or Payment System Players are Bank, Payment Bank, PPI, or any other RBI regulated entity

This Unified Payment Interface can change entire mobile payment ecosystem drastically. It is convenient and secure. Payer do not need to know the details of payee. Even payee can send payment request to payer by using this technology.

But still there are many challenges for Unified Payment Interface to be successful. These are

• Low non cash transaction per person in India (6 per year)
• Less number of retailers in India have card payment acceptance infrastructure
• Very less number of villages are under cover of banking facility
• Lack of awareness and technology knowledge of major portion of the population

Despite of that Unified Payment Interface has great potential to change the entire mobile payment system, increasing total number of smart phone users, migrated population in each city, low cost smart phones, growing educated populated and awareness among the people may help to be a game changer in payment ecosystem. This technology may reduce number of the mobile wallet users.

In recent past Flipkart bought Phonepe (Co-founded by ex-Flipkart employees Sameer Nigam and Rahul Chari) which is building India's 1st UPI based App and will launch soon to provide cashless transaction. It will not require any card or any wallet.