Unified Payments Interface (UPI)

Unified Payments Interface (UPI)

➥The Reserve Bank of India has released the guidelines for interoperability between prepaid payment instruments (PPIs) such as wallets and cards to transfer money from one wallet to another.

➥Unified Payments Interface (UPI) is a payment system launched by National Payments Corporation of India (NPCI) to aid instant transfer of money using a cashless system. Using UPI services, one just requires a smartphone and a banking app to send and receive money instantly or to pay a merchant for retail purchase.

➥In the long term, UPI is likely to replace the current NEFT, RTGS, and IMPS systems as they exist today.

The UPI ecosystem functions with three key players:

• Payment service providers (PSPs) to provide the interface to the payer and the payee. Unlike wallets, the payer and the payee can use two different PSPs.

• Bank to provide the underlying accounts. In some cases, the bank and the PSP may be the same.

• NPCI to act as the central switch by ensuring VPA resolution, effecting credit and debit transactions through IMPS.

How does it work?

• UPI, built on IMPS, allows a payment directly and immediately from bank account. There is no need to pre-load money in wallets.
• It allows payments to different merchants without the hassle of typing one's card details or net-banking password.