Unified Payments Interface (UPI): the instant payment that reshaped India's financial landscape

Instant payments perform swift processing and settlement of financial transactions, typically within seconds, utilizing modern payment systems like real-time gross settlement (RTGS) and immediate payment systems (IPS). They ensure real-time transfers, and some operate 24/7. 

Considered an alternative payment method, instant payments are crucial for quick and secure fund transfers, fostering customer satisfaction and operational efficiency in digital finance.

The Unified Payments Interface (UPI) is a digital and real-time payment system developed by the National Payments Corporation of India (NPCI) and regulated by the Reserve Bank of India (RBI).

Launched on April 11, 2016, UPI became the most popular payment method in the country, and it is projected to account for 90% of the total transaction volume in retail digital payments from 2023 to 2028.

Unlike traditional methods, UPI simplifies transfers using the recipient's UPI ID, be it a mobile number, QR code, or Virtual Payment Address, eliminating account numbers.

A consistent UPI transaction PIN across apps enhances cross-operability, enabling 24/7  transactions. This payment method also serves as an open-source API for various mobile payment apps, connecting banks, merchants, and users for swift transactions. 

UPI operates as a digital public infrastructure, allowing seamless interactions for all players, including merchants and customers, without transaction costs. Its centralized design reduces reliance on individual banks, while RBI's market share caps encourage competition.

Like Pix in Brazil, UPI's wide accessibility and convenience revolutionised digital payments, reshaping India's financial landscape.

One-charge option:

1. The customer picks UPI at checkout, opting for "UPI ID" or "QR code" payment.

2. If paying via UPI ID, the customer gets a notification to confirm payment; for QR code, they scan it.

3. On the UPI app, the customer verifies details and approves the transaction.

4. The transaction is confirmed after entering the customer's UPI PIN.

5. The process concludes with the customer being redirected to the order confirmation page, accompanied by real-time payment confirmation.

Recurring Payments (subscription model) option:

• Authorization Request Initiation:

  The process begins with an authorization request to set up a new subscription. This request is sent to the customer, prompting them to establish the conditions for recurring debits. This initial step is essential for enabling subsequent automatic payments.

• Customer Verification:

  As part of the authorization request, the customer receives a nominal and non-refundable charge of 1₹. This charge is sent through either QR code or VPA (Virtual Payment Address) flows.

  
  

  The customer's responsibility is to authenticate this charge using their UPI PIN. This serves as a confirmation of their enrollment in the subscription service. Importantly, this verification is a one-time action, ensuring a secure subscription setup.

  
  

• Authorization Request Details:

  The authorization request requires the following:

  1. Mandatory fields from the one-time charge flow.

  2. A subscription reference ID (a unique identifier).

  3. The maximum amount allowed for the subscription.

  4. The expiry date for the subscription is typically set for a standard period of 2 years.

     
     

  Subscription Models Offered

1. On-Demand Subscription: designed to give more flexibility in managing and specifying the amount and frequency of charges raised.

   With a minimum 24-hour interval between API charges and customer account debits, merchants ensure a controlled and smooth payment process. Plus, scheduled debits can be confidently set for up to D+14 days, offering flexibility while keeping customers informed.

   
   

2. Periodic Subscription: designed for fixed amounts and intervals predetermined by the merchant.

   Merchants must inform customers about additional rules governing recurring charges, such as fixed amounts and payment intervals (days, weeks, months, years). Once these rules are established, payments are directly debited at specified intervals.

Benefits of UPI for digital commerces (merchants)

1. Optimized cash-flows: UPI enables merchants to receive real-time payments, reducing waiting periods and ensuring immediate fund availability to reinvest or pay debts faster.

2. Enhanced Customer Experience: UPI simplifies the payment process for customers, leading to quicker and smoother transactions and enhancing their overall shopping experience.

3. Maximized Profit Margin: UPI transactions often come with lower processing fees than traditional methods, enabling merchants to save on transaction costs. It also increases revenue by attracting more customers and allows seamless recurring payments for subscription models.

4. Wider Customer Reach: UPI allows merchants to cater to a more extensive customer base as it offers a convenient payment option that many users prefer.

5. Digital Record Keeping: UPI transactions provide digital receipts, aiding merchants in maintaining accurate and easily accessible transaction records.

Benefits for Customers in India

1. Convenience: UPI eliminates the need to carry cash or cards; customers can make payments using their mobile phones, making transactions more convenient.

2. Secure Transactions: UPI transactions involve secure authentication methods, reducing the risk of fraud and unauthorized transactions.

3. 24/7 Availability: UPI operates round the clock, enabling customers to make payments at any time, including weekends and holidays.

4. Easy Fund Transfers: UPI simplifies peer-to-peer (P2P) transfers, allowing users to instantly send money to friends and family using their mobile phones.

5. Financial Inclusion: UPI's user-friendly interface and wide accessibility contribute to financial inclusion. Considering that 11% of the Indian population is unbanked and many don't have access to traditional payment methods, UPI enables individuals from various economic backgrounds to participate in digital transactions.

UPI is India's most popular payment method, with 300 million users and 500 million merchants utilizing it to accept business payments, according to The Times of India. UPI is a must for global brands aiming to expand in the country and improve cross-border operations.

Are you ready for secure, real-time payments and increased profitability in India? Enable UPI transfers via EBANX.