Unified Payment System

Context: It has been launched by National Payments Corporation of India (NPCI) with Reserve Bank of India’s vision of migrating towards a ‘cash-less’ and more digital society.

What is UPI?

UPI is a payment system that allows money transfer between any two bank accounts by using a Smartphone. It is based on the immediate payment service (IMPS) platform.

Objectives of UPI:

1. To offer an architecture to facilitate next generation online immediate payments.
2. To further propel easy instant payments via mobile, web, and other applications.
3. To simplify and provide a single interface across all segments

How is it different from the existing system?

1. The account holder’s IFSC code (account details) is not required in UPI. Thus, account details would be secured.
2. It is possible to have multiple unique virtual addresses and use multiple bank accounts, and without necessarily going to bank for a variety of transactions.
3. Transactions can be made 24×7 all year round.

Advantages of UPI:

1. It would help to move the country towards a more cashless model and more digital society.
2. It is important for the implementation of the JAM (Jhan Dhan Yojana, Aadhar and Mobile) trinity.
3. It would provide secure transaction:UPI has a single click-two factor authentication system which means that with one click the transaction is authenticated at two levels.
4. A UPI-enabled platform bank account can transfer up to Rs.1 lakh instantaneously.
5. It would bring down around Rs.21,000 core of annual cost of currency operation in India.
6. The system runs on an Immediate Payment Service (IMPS) platform, allowing the service “everywhere and anytime” availability.
7. It can help to address the issue of black money, tax evasion, and money laundering.

Concerns:

1. Digital literacy is still low in India.
2. The service requires a smartphone and an internet connection which are still not in the reach of huge population.
3. Providing secure transaction through UPI would be a challenge as various instances of hacking can be seen recently.
4. Operational language of the service is English. It needs to be provided in regional language to make it user friendly.

Conclusion:

UPI is a cheap, secure, reliable, mobile-first, inter operable and instantaneous settlement. It has turned one’s smartphone into a bank. However, it is required to expand its coverage and bring in those who are outside the payment system. Also, efforts should be made to provide this service in regional languages.

 References:

1. Decoding unified payment system, Explained section of Indian Express
2. What is UPI?, Business section of The Hindu
3. UPI: India’s biggest and boldest payment interface yet, Rajiv Anand, Livemint.
   

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