Previously, if you wanted to make a bank payment online, you have to provide their account number, type of account, name of the bank and IFS code. Even when if you have all these details, typing it all in, specifically on a phone, is a cumbersome process. Also, most banks can take up to 12 hours to add a new payee and only then you could made the transfer.
The main idea behind the development of UPI is to get this process faster and easier. The interface allow all account holders across banks to send and receive money from their mobile devices such as smartphones, tablets using just their Aadhaar unique identity number, mobile phone number(that is linked to their bank account) or virtual payments address without demanding any bank account details.
According to NPCI, most of the banks have agreed to start this service and are running it perfectly. If your bank is UPI-enabled, then you can apply to it to connect you to the system. For initialization of any transaction, you can use two types of addresses, i.e. global or local. Global address is the address which includes your mobile, your Aadhaar and bank account numbers. On the other hand, a local address can be a virtual address. Let’s say your bank gives you a virtual ID similar to your email ID (for instance, name@companyname). This virtual address will allow you to send and receive money from multiple banks and prepaid payment issuers.
So, now you don’t need to use any specific application to send and receive money. For instance, if you buy a cake from a bakery, for paying the bill you just have to give your virtual address and the merchant will send a request for money from it. You will be intimated through a message on your mobile phone asking for authentication. As soon as you authenticate the transaction by entering your password, it gets completed. Now, at any step, this whole process doesn’t require either the merchant or you to share bank details. Also, the service is available in real time and 24X7, as UPI runs on IMPS.
The man behind Aadhar and now an advisor to NPCI, Nandan Nilekani, tells that, UPI is a layer that is put on IMPS. The IMPS doesn’t really have the capability of debiting, easily from an account and that has been addressed by this platform. We think with UPI coming, it is going to be an important merchant platform. Once it is adopted by all banks, money can be transferred from a bank to any other bank using a mobile phone”.
UPI simplifies the online payments and transactions. Now, NEFT, IMPS or a digital wallet such as MobiKwik or Paytm can be used to make an instant payment to the merchants. With the use of UPI, you simply need to enter some details (but not your bank details), and get a paying request on your phone, which you can accept or reject on your side.
Travel services like Uber and Ola, online grocery portals like Big Basket, food ordering services like Zomato and Food Panda are able to take advantage of this UPI system.
Along with this, you can also send money to your friends and family in the blink of eye.
Thanks for Reading!!!!
