19th September 2021

Let me show how widespread UPI is.👇🏾

UPI: literally the boss

UPI: literally the boss

UPI or Unified Payments Interface is way to digitally transact money between two (different) bank accounts. It was started by NPCI or National Payments Corporation of India in 2016, and has been a game changer since.

Before diving deep into UPI as a product, let's understand NPCI clearly:

  1. NPCI is an umbrella organisation for retail payments setup by the RBI (2008) to grow the digital payment ecosystem of India. Retail payments are end to end payments taking place between consumers, businesses, or government - B2B, B2C, C2C, C2G, etc.

  2. Since then it has launched a multiverse of products like IMPS (Immediate Payment System), UPI, BharatQR, NACH, etc.

  3. NPCI handles approximately 60% of the total online transactions. That's too much power dependency on a single organisation. Imagine NPCI going down for a couple of mins?!

  4. Hence, RBI recently formed NUEs or New Umbrella Entities. It is a collection of various (for profit) companies like Razorpay, Zeta, Pine Labs, Paytm, etc, expected to build better infrastructure or products than NPCI.

    What is NPCI

    What is NPCI

Now, tell me more about the boss

Transferring funds has always been an indispensable part of our lives. It started from cash, cheques and DDs and then we went online with NEFT, IMPS, etc.

  1. The online ways before UPI were cumbersome. Imagine having to remember the IFSC code of your home town's bank while transferring money!
  2. UPI is unique because it offers instant fund transfer with round the clock availability (regardless of whether the banks are open/closed).
  3. Supports interoperability; direct bank A to bank B transfer, eliminating the need of loading wallets.
  4. Increased reliability since it's an RBI regulated entity. Also has 2FA (two factor authentication) to ensure security and minimise theft.
  5. No minimum transaction limitation (although it has an upper limit of INR 1L per transaction)

'BHIM' was an app launched by NPCI to show how UPI works. Post that, Fintechs and banks started innovating over the usage of UPI. And this was just UPI 1.0! We will discuss all nitty gritty including the technical details of UPI in following 3-4 essays.