UPI Creates Revolution In India — The Paradigm Shift Now Ready For Global Stage: Sethurathnam Ravi
Unified Payment Interface is a digital innovation with an instant payment option developed indigenously by the National Payments Corporation of India (NPCI) and launched in 2016 in India. Sethurathnam Ravi, the financial expert shares his views on the popularity of UPI and the revolution it makes in the country. The evidence of the popularity of UPI can also be seen with its usage being spread to our neighbouring countries like Nepal and Bhutan, the expert analyses.
NPCI is a not-for-profit initiative of the Reserve Bank of India (RBI) in collaboration with the Indian Banks Associations (IBA) under the provisions of the Payment and Settlement Systems Act, 2007. According to S Ravi BSE, this new venture has created a robust as well as scalable infrastructure and platform for electronic payment and settlement systems with tremendous possibilities for innovation. It also allows Fintech firms to integrate with it and provide value-added services.
Sethurathnam Ravi analyses that the UPI has provided Indians with a platform for the real-time transfer of funds as well as an easy and effective tool for digitisation of the payment services. It operates on top of the Immediate Payment Services (IMPS), which was created by the NPCI for instant fund transfers. “The system allows the user to operate multiple bank accounts across any participating bank for transferring funds and making payments to merchants through a single mobile application. The interface seamlessly allows a flow of funds from various participants including the payer/payee Payment Service Provider (PSP), remitter/beneficiary bank, NPCI, the user (bank account holder) and merchants”, he explains.
Sethurathnam Ravi details the working process of the UPI in his latest article, “UPI works using a technological process known as Open API (application programming interface). The starting point of the process is the creation of a UPI ‘handle’ by a bank account holder/ user that is also known as a Virtual Payment Address (VPA). VPA can be created in a matter of minutes and eliminates the risk of mentioning account/card, IFSC, and other details in every transaction”.
The only pre-requisite for creating a UPI handle as S Ravi BSE mentions is that one’s bank account has to be linked to a mobile number. The next stage is that the Payment Service Provider (PSP) takes care of the transaction between the sender and receiver of funds. The transaction flows from the sender’s VPA to the receiver’s VPA linked with the underlying bank account. Finally, the UPI software coordinates the fund movement from a user’s/payer’s VPA to a target/payee’s VPA and completes the transaction. This transaction is different from paying with a debit card or credit card as it does not involve a Merchant Discount Rate (MDR). The MDR is a fee that the recipient bank collects from the merchant.
According to the financial expert, Mr. Sethurathnam Ravi, “the ecosystem in which UPI thrives is also key to its success — such as the presence of high-speed internet in many parts of the country, technologies that power a smartphone, cloud computing and modern software engineering technologies that fulfil a transaction in a few seconds. The UPI is a phenomenal Indian technological success story”. The interface in a short period has facilitated Indians to move from a cash-based economy to a digital economy. It has been interesting to see that mobile has taken the place of a wallet/chequebook and is slowly taking over the use of cards in transactions. The pandemic has taught us that the future is digital and the contribution of UPI to the cause is phenomenal, Mr. Ravi concludes.
