Road to cashless society: Here’s how Unified Payment Interface works

1

• Road to cashless society Heres how Unified
  Payment Interface works

2

• Understanding the Unified Payment Interface
• RBI Governor Raghuram Rajan along with National
  Payments Corporation of India (NPCI) adviser
  Nandan Nilekani launched the Unified Payment
  Interface (UPI) with the objective of proactively
  encouraging electronic payment systems for
  ushering in a cashless society in India. The
  interface aims to provide a safe, efficient,
  accessible, inclusive, interoperable and
  authorized payment and settlement system for the
  country.
• Here is a quick guide on one of the landmark
  changes to take place in the financial sector.
• What is the United Payment Interface (UPI)?
• As the name suggests, UPI is an application level
  interface that aims to bring under its umbrella
  the multiple payment service providers presently
  operating in the country by adding a layer of
  interoperability within such platforms. It will
  enable anyone with a bank account to complete a
  transfer or make a payment without having to
  share bank account or credit/debit card details.
  It also incorporates additional functionality of
  authenticating such transactions with known
  identifiers like Aadhaar number.

3

• This interface is vendor agnostic, so banks,
  e-commerce portals or any other platform involved
  in monetary transactions will need to include
  this interface within their payment applications
  instead of the end users having to use multiple
  applications.
• Why do we need a platform like this?
• The record of cashless transactions in our
  country is very dismal. At present it stands at 6
  transactions/person/year which is partly due to
  the fact that out of the 10 million plus
  retailers in India, hardly 1.1 million have card
  payment acceptance infrastructure. The RBI has
  been vocal about ushering in more cashless
  transactions and one of the ways to do so is to
  tap into the expanding smart phone ecosystem that
  is slated to reach close to 500 million users in
  next five years.

4

• The long-term goal is to use the UPI as a means
  to financial inclusion by encouraging
  transactions among the newly added accounts under
  the Jan Dhan Yojana (PMJDY) and direct benefit
  transfer programs.
• How much of a part does Aadhaar play in the Upi?
• The Aadhaar system that has close to 80 crore
  enrolments and is now legally accepted as a form
  of identity for Indian residents is the backbone
  for authentication and authorisation in the UPI.
  Aadhaar authentication is the process wherein
  Aadhaar number, along with other attributes,
  including biometrics, will be submitted by the
  interface to the UIDAI system for verification.
  There is also a provision for financial
  institutions to integrate their Aadhaar based KYC
  into their applications that use UPI.

5

• The most notable feature however is the Aadhaar
  Enabled Payment System (AEPS) that enables banks
  to route the financial transactions through a
  switching and clearing agency allowing citizens
  to authenticate and subsequently operate their
  respective Aadhaar enabled accounts as well as
  perform basic financial transactions. So
  essentially, Aadhaar-enabled payments
  architecture is an overlay on the existing
  payment architecture of UPI, with the task of
  user verification handed over to the Aadhaar
  repository with UIDAI.
• How will transactions done under UPI work?
• The interface will sit on top of existing payment
  system by integrating into their code. The
  National Payment Corporation of India (NPCI) will
  maintain a database of customers Aadhaar number,
  Mobile number and Bank accounts. This central
  repository (Central Mapper) will be used to route
  payment instructions based on Aadhaar number or
  mobile number.
• The Aadhaar Payments Bridge System (APBS) will
  use the NPCI Central Mapper as a part of National
  Automated Clearing House (NACH) to enable
  government departments to electronically transfer
  subsidies and direct benefit transfers to
  individuals mapped to their Aadhaar number.
  Similarly, Central Mapper will allow anyone to
  send/receive money from a mobile number without
  knowing the destination account details. This is
  achieved by mapping mobile number to one or more
  accounts.

6

• What are the main benefits of Upi?
• For the end users the most important feature of
  UPI is the ability to make payments by providing
  a virtual ID without having to provide account
  details or credentials to 3rd party applications
  or websites. It would also provide the ability to
  pre-authorise multiple recurring payments similar
  to ECS (bill payments, fees, subscriptions, etc.)
  with a one-time secure authentication and rule
  based access. Payments would be more secure with
  the introduction of single click two-factor
  authentication by using a personal phone without
  the need of new devices or hardware tokens.
  Lastly, as more and more payment service
  providers integrate this interface in their
  applications it will led to a fully interoperable
  system across all PSPs.

7

• What does this mean for e-wallets and bank
  specific mobile applications?
• While the UPI platform appears to target the
  transactional space presently occupied by
  e-wallets, the fact that UPI is vendor agnostic,
  would allow e-wallets to integrate UPI in their
  application and ease the process of loading money
  in the applications. Interoperability among the
  applications bought about by integrating UPI will
  indirectly led to more user friendly features
  getting added to e-wallets in the long run. As
  for bank specific applications, they should look
  to integrate UPI at the earliest as these will be
  the first applications to enable end users to
  avail of the benefits of UPI. Some banks like Yes
  Bank have already integrated UPI in their
  application, and early movers will definitely
  have an advantage.

8

• One aspect that has not been clearly defined in
  UPI is that of grievance redressal. It is
  expected that once the technical integrations
  begin, a very clear path of addressing end user
  issues is charted out. The ownership of
  transaction failure on a platform that is masking
  identity of the parties engages in the
  transaction needs to be defined on the onset.
  This will augment end user trust in the platform
  which will in turn lead to widening of the user
  base.
• Indian banking sector should look at the UPI as
  the disruptive innovation that will take its
  service delivery to the next level while enabling
  financial inclusion in a single stroke and push
  for adopting this technology with a sense of
  urgency.
• Source http//bit.ly/2q9eH5d

9
Follow Us On
https//www.facebook.com/axisbank
https//plus.google.com/axisbank
http//twitter.com/axisbank
https//www.youtube.com/axisbank
https//www.instagram.com/axis_bank/
https//www.linkedin.com/company-beta/162609?pathW
ildcard162609
10
Click to know more onUpi

• https//play.google.com/store/apps/details?idcom.
  upi.axispay