Unified Payments Interface: A Comprehensive Guide

The Unified Payments Interface (UPI) is a game-changer for making payments in India. It was launched in 2016 by the National Payments Corporation of India (NPCI).

UPI allows users to link their bank accounts to a single interface, making it easy to send and receive money. This eliminates the need for multiple bank accounts and debit/credit cards.

To use UPI, you need to download a UPI-enabled app, such as BHIM or Paytm, and link your bank account to it. You can then use a Virtual Payment Address (VPA) to make payments.

UPI transactions are fast, secure, and convenient, with a success rate of over 99%.

UPI has come a long way since its inception, with UPI 2.0 being the latest iteration of this revolutionary payment system.

UPI 2.0 builds upon the foundation laid by its predecessor, UPI 1.0, to further simplify and enrich the digital payment experience.

Razorpay made history by becoming the first payment aggregator to introduce UPI payments through its platform in 2016.

We launched UPI AutoPay and UPI 2.0 features, showcasing our commitment to innovation.

Razorpay's close partnership with NPCI gave us an extra edge to stay ahead of our competitors.

Interestingly, Razorpay is also the market leader in P2M (person to merchant) UPI payments in India.

With the launch of UPI 2.0 in August 2018, the payment system took a significant leap forward, introducing new features and capabilities that have revolutionized the way we make transactions.

One of the standout features of UPI 2.0 is the ability to link overdraft accounts to a UPI handle, allowing users to perform transactions even when their account balance is insufficient. This has ensured uninterrupted services for users.

UPI 2.0 also introduced the auto-pay facility for recurring payments, which has been a game-changer for businesses with subscription-based services. As of August 2021, State Bank of India, Bank of Baroda, and Paytm Payments Bank have been live on UPI AutoPay, each registering a significant number of mandates.

The new version of UPI also enabled users to pre-authorise transactions by issuing a mandate for a specific merchant, making it easier for businesses to initiate transactions without repetitive authorisation.

Here are some of the key features of UPI 2.0:

The introduction of UPI 2.0 has also streamlined the payment process for customers, as they receive detailed invoices directly in their UPI apps, simplifying payment validation and reconciliation.

The Digital India program has overhauled the country's digital public infrastructure (DPI), according to Prime Minister Narendra Modi, who praised the program's progress.

At its 9-year anniversary, Modi acknowledged the significant gains made by Digital India, which is a testament to the government's commitment to modernizing the country's digital landscape.

Digital India has made a substantial impact on the country's digital public infrastructure, with Modi himself highlighting the program's achievements.

The process of bank transfers is a crucial step in the payment flow, ensuring that funds are transferred from the sender's account to the recipient's account. This phase involves several key steps, including detail sharing, fund deduction, and credit to the recipient.

Detail sharing is the first step, where the Payment Service Provider (PSP) shares the sender's bank details with the UPI system for verification and routing. This is essential to ensure that the funds are deducted from the correct account.

The NPCI checks account details and fund availability, triggering the deduction from the sender's account if sufficient funds are available. This is a critical step to prevent transactions from failing due to insufficient funds.

The acquiring bank, which is the receiver's bank, receives the transaction amount and credits it to the payee's account. This step is often overlooked, but it's essential to ensure that the recipient receives the funds successfully.

Here's a breakdown of the key steps involved in Phase 2:

In some cases, the transaction flow between banks may involve additional steps, such as routing the request and verification by the debtor's bank. This is a more complex process, but it's essential to ensure that the transaction is completed successfully.

Unified Payments Interface (UPI) offers a range of features and benefits that make it a convenient and secure way to make payments. UPI is a fast, real-time system that is available 24*7, 365 days of the year, enabling money transfer and payments within seconds.

You can pay for various services like hailing, food delivery, shopping, rent, mobile recharge, and utility bills using UPI payments for instant fund transfer. With UPI, you can also request money by sending a message or requesting payment via the bank, a facility not available in old systems like NEFT and IMPS.

Here are some key features and benefits of UPI:

Conversational Voice Payments allow customers to complete transactions using their voice or by typing their UPI ID or mobile number.

This new functionality is enabled by BharatGPT and linked with payment gateways, making transactions more convenient.

The system automatically obtains the associated UPI ID and starts the payment request through the user's default UPI app when a mobile number is entered.

Users can update their UPI ID or mobile number within the transaction time limit, giving them flexibility.

Conversational Voice Payments reduce linguistic barriers and increase accessibility and human-centeredness of transactions.

The technology supports Hindi, Gujarati, and other languages, improving the multilingual system and ensuring inclusion in the payment process.

Users of AskDISHA, the AI virtual assistant for Indian Railways and IRCTC, can now buy tickets and make payments with just their voice thanks to the integration of Conversational Voice Payments.

Vouchers offer a smooth digital payment option for various scenarios. This is thanks to the adaptation of UPI Vouchers, which allows businesses and individuals to issue and use them more easily.

With UPI Vouchers, users can transfer prepaid vouchers connected to the recipient's smartphone number. This means the recipient doesn't need to connect their bank account to UPI to use them for payments.

UPI Vouchers were first made available for COVID-19 vaccine payments and will be released in the second half of 2024. This feature is expanding to a wider range of industries.

This feature makes financial transactions easier for users. It also offers a convenient option for corporate gifts, government programs, and other scenarios.

Features of 2.0 include an overdraft facility, allowing users to link their overdraft accounts to their UPI handles. This empowers users to perform transactions even when their account balance is insufficient, ensuring uninterrupted services.

UPI 2.0 also enables users to create one-time mandates for pre-authorised transactions. This feature is particularly beneficial for businesses that offer subscription-based services or have recurring payment requirements, providing a hassle-free way to initiate transactions without repetitive authorisation.

One of the standout features of UPI 2.0 is the ability to link multiple bank accounts to a single UPI handle. This feature offers added flexibility and convenience, enabling users to choose from different accounts when making transactions.

UPI 2.0 enhances security by introducing signed QR codes. These QR codes carry digitally signed information, ensuring the authenticity of the merchant and preventing potential QR code tampering.

Here are some of the key features of UPI 2.0:

UPI 2.0 also incorporates biometric authentication, leveraging fingerprint and iris scans for secure transaction authorisation. This advanced authentication method adds an extra layer of security to UPI transactions.