De-jargoned: Unified payments interface system

The UPI system will allow a customer with a bank account to transfer money and make payments almost as easily as she sends a text message

The National Payments Corp. of India Ltd’s (NPCI) most ambitious project, unified payments interface (UPI) system, will go live in April. It is a next generation payment system set to change the way retail payments are made in India. This system will allow for a one-click, two-factor authentication on mobile phones across bank accounts. Here’s a look at how it works and what it means for you.


The UPI system will allow a customer with a bank account to transfer money and make payments almost as easily as she sends a text message. It will run on the Immediate Payment Service (IMPS) platform. At present, IMPS allows you to send money from one bank account to another on real-time basis and is available 24x7. A transaction can be carried out only if both sending and receiving banks have enabled the IMPS. So far, there are over 100 members who have enabled IMPS.

UPI will be built on the existing platform of IMPS. While IMPS requires you to know multiple details related to the receiver’s bank account, the UPI system will need just one virtual ID, similar to an email address for authentication. For example, IMPS requires details such as Mobile Money Identifier—a seven-digit number issued by a bank—mobile and account numbers to complete a transaction. But UPI requires only one ID and doesn’t disclose your bank account details.


To be able to use this, your bank needs to enable the UPI-based service for you. According to NPCI, so far only 29 banks have agreed to start this service. If your bank is UPI-enabled, you can ask it to connect you to the system. To initiate a transaction, you can use two types of address—global or local. Global address includes your mobile, Aadhaar and bank account numbers. A local address can be a virtual address. Let’s say your bank gives you a virtual ID similar to your email ID (for instance, name@companyname). This virtual address will allow you to send and receive money from multiple banks and prepaid payment issuers.

So, you will no longer need to use a particular app to send and receive money. For example, if you use a taxi service, at the end of the journey you just have to give your virtual address and the driver will request money from it. You will get a message on your mobile phone asking for authentication. Once you authenticate the transaction by entering your password, it will be complete. This process doesn’t require either the driver or you to share bank details. Since UPI runs on IMPS, the service will be available real time and 24X7. For every transaction made using UPI, NPCI will earn 50 paise.


NPCI is yet to launch the product, hence, it is difficult to predict how seamlessly it will work. However, it might be game changer for payments and transactions. The UPI will allow you to use any bank product without being a customer of that bank. The launch of UPI will also impact wallets, especially those services that exist only as a product that allows ease of transaction.

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