UPI payments meaning:UPI is a mobile application that helps to transfer money between two different bank accounts. It is one of the most used mobile application payment systems that was developed by the National Payments Corporation of India (NPCI). The need for UPI helps to eliminate bank details each time while making the payment.
NPCI stands for National Payments Corporation of India is an organization that is being guided and supported by RBI and IBA for retail payments across India. NPCI was created under the provisions of the Settlement and Payment System Act 2007. The act is defined as it provides for the regulation and supervision of payment systems in India and designates the Reserve Bank of India as the authority for that purpose and all related matters.
NPCI has enlisted ten core promoter banks those are:-
- Canara Bank
- Union Bank of India
- Bank of Baroda
- ICICI Bank
- HDFC Bank
The reason behind promoting those banks is that the Indian government needs to promote the digitalization of money and digital payments. So, the need and managing organization needs to make NPCI for all the retail transactions.(UPI payments meaning)
Objectives of NPCI(UPI payments meaning)
NPCI organization that was founded by the RBI’s main objective is to improve the infrastructure of the entire banking industry. So for digitalized transactions, those banks that are listed above are talked to introduce this needed concept of UPI. With the introduction of UPI, electronic and physical settlement and money transfer systems.
The main objectives of NPCI are:-
- NPCI’s goal is to merge numerous payment systems under one standard organization that process all retail money transaction.
- The technical innovation via NPCI in retail payment helps to achieve great efficiency in the operation and increase the reach of the payment system.
- NCPI tries to use one law in which all the retail and the customers come under one nation that can be uniformly standardized.(UPI payments meaning)
Services of NPCI
There are various services provided by the NPCI. Those are listed as:-
- NFS (National Financial Switch)
- IMPS (Immediate Payment Service)
Let’s discuss them below in detail.
NFS (National Financial Switch)
National Financial Switch is a big network of ATMs (Automated Teller Machines) in India. It is designed and deployed in such a manner that has the aim of interconnecting ATMs in the country and helps in convenience banking.(UPI payments meaning)
Benefits of NFS
- Customer experience
- 24×7 availability
- Safe and secure
Services available under NFS
- Cash Withdrawal
- Balance Inquiry
- Mini Statement
- PIN Change
- Card-to-card funds transfer
- Chequebook request
- Statement request
- Mobile banking registration
- Aadhar Number seeding
IMPS (Immediate Payment Service)
IMPS stands for Immediate Payment Service which helps to transfer electronic funds from inter or intra-bank transfers instantly. It helps the customer to transfer money instantly from one account to another in real time. IMPS enables to sending of money to the beneficiary’s account in no time. It means that the transaction takes place fast. There is no minimum limit on the transfer amount and the maximum that can be sent is 2 lac per day.
These types of services of sending funds instantly are available 24/7 throughout the year. The main feature of IMPS is that the user can transfer funds from any mode like via mobile or SMS or net banking or even via ATMs.(UPI payments meaning)
RuPay stands for Rupee and Payment which is a multinational financial services along with Payment service system that was launched by NPCI in 2014. The main aim is to fulfill the needs of RBI stating that all transactions whether domestic or international should be conducted under one system or organisation. RuPay is facilitated with electronic transactions under all Indian banks. The international acceptance of the transaction in foreign lands is enabled by Discover Financial and JCB.(UPI payments meaning)
How UPI works?
Upi is a real payment system that is used to transfer funds from one account to another with the help of a two-factor authentication process. The UPI is Regulated by the Reserve Bank of India. The money is been transferred via the mobile platform. UPI is one of the safe and fast ways to transfer money to different parties that helps to eliminate the third party or visit the bank as well.
The UPI was launched in 2014 but it took 2016 to get to the pilot system. The interface was being uploaded by different banks in Aug 2016. UPI also has different services which include IMPS and AEPS. AEPS stands for Aadhar Enabled Payment System through which funds are being transferred across different accounts. UPI has the feature of scanning the barcode for processing the payment.
UPI also has the support of multiple payments that are based on subscriptions like Spotify, Netflix, etc.
The basic principle of working of UPI
When a user downloads any payment application on their phone their phone has been becoming the mode of payment. The user does not need a credit card debit card or net banking for any transaction. Due to this great security is being provided hence making it more reliable than any other mode of payment.(UPI payments meaning)
When the application is being downloaded, the user is asked to log in or sign in. The reason behind this is that it stores all the data in the cloud in case of emergency and that can be used at that interval of time. Once sign-in is done, then accepting the terms and conditions, it asks for adding the bank account. It is the spot where you going to see the magic.
(UPI payments meaning)
While adding the bank account in the application, just ask for the bank name in which you have the account and the second thing is the number that is linked to the bank account which you want to add in the payment application. After collecting all the necessary information, the application sends an encrypted message to the bank server to find the account in that particular bank. This step only takes 60 seconds at high time of server failure.
Once the account is identified, it shows you the account number and the name at which the account is held. This is the initial step to link your bank account to the payment application. Now once you have linked the bank, then you need to able to use it. To have access to the account, you need to use your debit card. The application asks for the last 6 digits of your debit card number along with the card expiry date and CVV.
CVV stands for Card Verification Value. It is a number that is being provided to all the card present in the world that has physical or digital existence. Once all the details are filled in correctly, the PIN can be generated for that particular account. Once it is done, you will be provided with a list of UPI endings. Those endings are simply to identify your unique UPI ID.
(UPI payments meaning)
After selecting one UPI ID, the transaction can be made with anyone who uses UPI as a mode of payment. UPI has the feature that the user does need not to go to the bank for any transaction or any paperwork. It just took 15 mins to get ready to be modernized.(UPI payments meaning)
There is one small thing the UPI ID can be numerous for one bank account. To explain this statement correctly, many payment application uses different banks for example Google Pay uses ICICI Bank and State Bank of India, etc. so the UPI ID will be created under ICICI Bank or State Bank of India. It doesn’t mean that I have to open a new account. It only means that different payment application provides different names. For example, in our house, we have some different name and when we go to relatives we have different name but our real name is completely different. It doesn’t mean that the official name is changed.
Advantages of UPI
There are numerous advantages of UPI and some of them are listed below:-
- Secure and fast transaction
- User-friendly experience
- Security at its supreme
- Integration along with interoperability
Secure and fast transaction
UPI has offered security and fast transactions. The need for users to go to the bank for transactions has been eliminated. The pile of paperwork has also been removed with the help of UPI. With the help of UPI, users can send and receive money. All the transaction that happens are done in real-time. UPI has also provided a feature that helps to scan the QR and hence payment is done via UPI. UPI has a feature that one can send money or request money on the UPI if the user knows the UPI ID of another person. With all those features it is one of the most reliable modes of payment.(UPI payments meaning)
Most payment application has a very simple interface that helps the user to adapt to these kinds of technology easily and quickly. The application has numerous features for the betterment of the user like the use of multiple banks. It means that a person having a bank in any account that is being registered in the RBI (Reserve Bank of India) will be listed in the application. This kind of convenience is being provided to the users. There are no fees that are being charged to the users if the payment is made via UPI and hence it is preferred by most of the users in India.
Security at its supreme
UPI has been facilitated with two-factor authentication. It is the most advanced feature that helps to make the payment secure via two-way. It means that the sender needs to scan or enter the UPI ID of the receiver and then once the amount is entered, then PIN has to be provided which was created at the start of the application to make the payment possible. The payment is also encrypted at both ends. It means that humans cannot under machine language and hence computers only understand those languages making it completely impossible to detect. Various tools are provided by the payment application for the betterment and enhancement of security.
Integration along with Interoperability
Interoperability is provided by the payment application which helps to allow users to transact seamlessly with any bank or service provider. This payment application encourages each other to compete and this payment application comes up with numerous innovations making it interesting for the user. This competitive feedback benefits both users as well as businesses. Payment application is being integrated with other apps that help in fast and secure payment. With this step, more merchants can make payments digitally via UPI, and due to this customer base also expands.
Impact on Digital Payment by UPI
With such new technological advancements, there have always been impacts in the right manner since 2016. Let’s discuss them below in detail.
- Financial insertion
- Uplisting E-commerce
- Small-scale business
UPI has been one of the most important parts of our daily life. It is one of the most simple, accessible, and affordable modes of payment. UPI has powered most of the banks and individuals with the use of UPI. The barriers set by the UPI are very low as compared to other modes of payment hence making it most reliable and trustworthy at the same time. One of the good things about UPI is that it has financially made us more independent than we were previously. The amount of features provided by the UPI has tremendously worked in the favor to uplift the business sector to new heights.
A few decades behind, the use of cash by customers was more inclined to. It was very difficult for the government to keep track of the cash and hence can lead to fraud as well. So the government decided to overcome such issues, and the use of UPI is one of the reliable ways. Due to this UPI was introduced and the government has an easier way to see the cash flow and track them as well. UPI has provided transparency, accountability, and efficiency at the same time. With all these features, businesses, government agencies, and the economy are being boosted with the use of UPI.
UPI is a great example that helped the e-commerce website which helped them to get a concrete base on which they can rely. With the feature of UPI of seamless online transaction, the customer tends to incline more toward online shopping making them expand their business directly. With the help of UPI, the use of currency has been reduced to a great extent, due to which risk factors have been reduced. The shift from cash to cashless has provided a boost in the growth of business. UPI has also increased the customer base and expanded business which makes it impossible to transport products or services as compared to the city.
UPI is very much beneficial to the small-scale business. They have adapted to digital payment which has reduced the cost and made it easy to handle at the same time. As small-scale businesses do not have funds for the infrastructure and hence UPI is a great way to pave their way to success. There is no need for any high-end software or hardware for UPI to make it work. It is an automated payment system that is governed by NPCI organization. With the help of UPI not only customer experience but it has also accelerated the workflow and cash flow to a greater extent.
The future potential of the UPI
UPI has proven to withstand new and upcoming technological advancements and has a great future scope. UPI is still gaining popularity as the interface is simple and makes it easy for most of the users and aged users as well. They do not feel any complications in using UPI as a mode of payment. Some of the potential areas are:-
- Integration in more services
- Moving into the International Market
- Updating security patches
Integration in more services
UPI has been working completely fine but NPCI does not want to make it a threshold. They want to expand in more areas where their use of cash can be replaced with UPI’s mode of payment. Some of the fields of services in which UPI can be used are insurance, bill payments, investments, etc. Due to this government has the track of the cash flow and hence reduces the cases of fraud. The other feature of the use of UPI in more services will help in improving the customer experience. UPI has also helped in financial planning and management as well.
Moving into the International market
UPI is expanding itself all over the country and now UPI needs to explore international borders as well. These are being done by exploring interested users and encouraging them to use UPI as a mode of payment. Other modes of payment charge some fees when completing an international market. After the international market accepts UPI, then it is a great opportunity to reduce international charges hence making it the more powerful mode of payment. With UPI, the international market tends to believe that it is safer, more secure, and faster the transaction, and low charges for transactions in different lands will encourage other users to use UPI.
Updating Security Patches
UPI is an online mode of payment and many hackers have the potential to retrieve the most important data hence making it risky for each user that uses UPI. For this, UPI has been adding more tools to keep the data secure with the help of encrypted transactions and two-factor authentication. Technological advancements like biometrics and AI (Artificial Intelligence) can help to strengthen the security of the UPI. When different tools and software are being used most of the users rely on our transactions to be secure and build an unknown trust with the user making it one of the best modes of payment.
The role of UPI in digital India has been moving ahead with the nation. The amount of trust it has built with the workflow of the UPI has made people crave it. NPCI handles the UPI transactions that are occurring all over the world as the task of the NPCI is to make the proper flow of cash and work needs to be taken care of. The NPCI is being founded by RBI.
In this, we have talked about what is UPI and the working of UPI. The working of UPI is very simple when compared to other modes of payment. The amount of security it has that we need not add the account number as it contacts the bank in their machine language and identifies the bank details with the provided details. UPI is amazing in its way.
Then we talked about the advantages of UPI in understanding what a decent leverage it has on the Indian market. The impact of UPI in the market has been appreciable since it was introduced in 2014 but users can be UPI at full potential in 2016. The wait of 2 years can be seen in the technical support and amount of security provided by the NPCI is tremendous.
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NPCI does not want to limit the usage of UPI. They want to explore the international market and of that Discover has tied up with us which makes our step out in the international market. The future scope of UPI consists is amazing. There are various service sectors in which the use of UPI is not introduced. But UPI has the potential and will one day all those fields as well.
UPI is the best form of online mode of transaction. The benefits provided by the UPI and the ease to the customers are appreciable. UPI will be exploring the international market soon in the future and the security patches that help to keep the transaction and data secure is something godlike. UPI has a tremendous future scope and will excel in the future as well with such a powerful and concrete organization looking for the betterment of UPI. NPCI and RBI are looking for the UPI and India will excel in making the UPI the best mode of online payment.