Your friend is in deep trouble

You are going to Pune to attend your boss’s daughter’s wedding. You’ve just crossed MP border and you receive a call from your friend. It’s urgent, he needs 10 thousand rupees immediately.

So what do you do? Well, you can ask your another friend to transfer the money. You call him and you get a lovely voice telling you “the person you are trying to reach can’t be reached right now.” You start getting a little nervous.

Technology to the rescue, your bank app installed on your smartphone. You close your eyes, and take a deep breath. Finally, your smartphone will be used for something other than blissful time wastage.

But, you see a problem. You have an HDFC bank account while your friend is an ICICI patron. And it may take 1-3 days for the money to get transferred when the two parties are with different banks.

Now, not every daily life situation is extreme like the one I presented to you. But the reality is well known. Money transfers are painful. Not everybody has a credit card, and not every business accepts debit cards.

This is what Unified Payment Interface wants to solve. Instant money transfer between two bank accounts with the help of smartphones. As a bank account is the most fundamental unit of the economy, experts are considering this a smart concept.

You don’t have to wait. You don’t have to use your cards, debit or credit. You don’t have to ask for bank account numbers, IFSC codes and other confusing details.

You just ask your friend for his UPI address, which will be something like – myfriend@hdfcdelhi. Your friend will accept the payment on his smartphone and you’ve just saved his life in a matter of minutes.

Welcome to cashless and card-less payments

Behind UPI is NPCI, National Payments Corporation of India. NPCI’s vision is a cashless future, which is also the vision of RBI, according to the visionary Governor Raghuram Rajan.

At the UPI launch event, pretty much all present members resonated with this message. Makemytrip’s founder and CEO, Deep Kalra told the story about how he had to withdrew the service from Indian market because of the tedious online banking processes.

He said UPI will make the online bank transactions as smooth as credit card transactions. Credit card penetration in India is not as good as that of in developed countries. But most people do have bank accounts. So, UPI will benefit both the business and the consumer.

How can general public will use UPI

Right now, 29 banks are offering UPI services and others will follow soon. The registration process is just like other banking service requests. You just make a request to your bank for UPI facility. And after confirmation from the bank you can start using it.

UPI is bound to smartphone technologies. That means you’ve got to have a smartphone and your bank’s app installed in order to use UPI. NPCI is betting on India’s smartphone penetration and it may seem like a limitation to some.

To see UPI in action, let’s assume the friend situation that we discussed earlier. With UPI facility, you can open your bank app. Go to its UPI Transfer section. Enter your friend’s UPI ID, say friend@axis and send the desired amount.

After you click send button, the request will go to your bank. Your bank doesn’t know which bank account is associated with friend@axis UPI ID so it will inquire NPCI. NPCI will then look up for the bank account associated with that particular ID and initiate the transfer.

![UPI Transfer Process]Universal Payment Interface Flow

As you can see, only banks need to connect with UPI, not the end user. The transfer is just a matter of minutes. It’s totally secure, using Public Key Infrastructure encryption system.

How UPI is different from other payment methods

Let’s make it clear up front, UPI is nothing but a money transfer method. Just like NEFT and IMPS. This means it adds to other currently operational transfer methods like credit cards and net banking, not eliminate them completely. UPI may diminish the outreach of mobile wallets though.

UPI is special because it makes money transfers a breeze. It doesn’t require your to enter sensitive information every time you do a transaction. You just have to know only the UPI ID of the person you are transferring the money to.

Essentially, UPI sits on top of IMPS infrastructure. IMPS, or Immediate Payment Service is another widely used interbank electronic money transfer service from NPCI. When a person uses UPI for a payment, he is essentially using IMPS infrastructure.

UPI improves upon IMPS in a way that you can not just only send money, you can also request money. Also, with the UPI, the process is much faster and happens within the banking app.

 What it means for commerce and e-commerce

Small businesses and merchants can make payment requests and accept payments easily. They can send invoice with their UPI IDs to collect payments. The payment process becomes joyfully easy.

Now, medium to enterprise level businesses have another hurdle to finish. To them, UPI is just another payment method which they have to deal with once it gets mainstream.

NPCI has tight rules and regulations for UPI usage and till this point only PSPs, ie banks can use this technology. That means you’ve gotta be using some UPI-ready bank specific payment gateway to start accepting payments via UPI.

Sure, third party payment providers and businesses can request NPCI for the UPI access, and they will. But considering regulations, it might take some time to get them on board.

Nonetheless, we may soon start to see UPI integration within the apps of big e-commerce players. We can also hope for third party payment providers getting banks’ nod to use their UPI platform.


UPI is an ambitious initiative and the timing couldn’t be better. India is a booming economy and banking is the backbone of any economy.

UPI will make transactions and transfers hassle-free and more secure. Businesses any size will benefit from its adoption.

Now, it’s banks’ and the people’s turn to make it a success. Large e-commerce players may already have UPI integration preparations going on.

Small businesses and e-commerce players need not to worry as their favorite payment gateway provider may soon start offering UPI services.