Get ready for Unified Payment Interface

RBI Governor, Raghuram Rajan yesterday announced the introduction of the Unified Payments Interface (UPI). The UPI is a payment architecture presented by the National Payments Corporation of India, NCPI which will facilitate payments via aliases and will not require account details while enabling full payments.

What the UPI will essentially achieve is that it will eliminate the need for each bank to maintain relationship for settlement, instead they will have to maintain just one with NCPI.

The payment gateway will also help merchants to set up an alias to receive and make payments.

This decision by RBI to set up UPI will directly result in steady decline of net banking and wallet payments. Although Debit and Credit Cards will still have some uses for payments on International Websites, as UPI will not have any influence there.

Rajan announced that the UPI is initially launched with 29 banks, although it will soon cover all the banks in the country. The UPI architecture from the National Payments Corporation of India is all set to overturn the way payments are made in the country and will allow users to facilitate a transaction without having to actually divulge their account details.

Payment gateways, currently have to maintain an individual relationship with each bank in order to route, settle and receive payments. However, with the UPI in place, this would be totally eliminated, and instead of the multiple banks, it will only be the NCPI.

UPI will be a boon for payment gateways.

The RBI plans to initially offer the UPI as another payment method in addition to cards, net banking and wallets. As and when UPI becomes more mature as more banks join in, it will ease the efforts and help the merchants.

Of the 29 banks that have tied up with the National Payments Corporation of India (NPCI) that launched the UPI, only 10 banks are ready with the app for the service.

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However, these banks are still in the pilot stage and it will take them two more months to open the interface to customers, according to Dilip Asbe, chief operating officer, NPCI. “Ten banks that are ready with the application right now will be testing it internally for the next few weeks. This will include end-to-end tests and will be done to check security, convenience.”

As of now, RBI is pondering over a 2-5% fee on every transaction through UPI. While transactions through debit cards are much lower, credit cards attract a considerably higher fee, while charges on net banking vary from bank to bank. UPI will do away with all the mediators in the online payment chain which will effectively cut the end costs.

However, this does not spell the end of either the credit cards or the debit cards, as even when UPI is out and fully functional, people will still need the cards to make purchases on international websites like Apple Music and Netflix.

However, the UPI is likely to threaten the business of online wallets as what the UPI will do is effectively turn a bank account into an online wallet.

The NCPI in a statement said that payments on the UPI will incorporate two factor authentication. Currently it will work on an m-PIN. Users will have set up a mobile-PIN linked to their bank accounts. Each transaction will then be authenticated using this m-PIN. The other factor of authentication will be the registered phone number with the bank account.

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