To make digital payments more mainstream, instantaneous and secure, the Reserve Bank of India today launched the Unified Payment Interface (UPI) developed by the National Payments Corp of India (NPCI).
This will allow people to transfer money from one bank to one another using a single interface. Through UPI, money will be transferred instantly as opposed to the time taken while using online banking.
Currently, only Immediate Payment Service (IMPS) offered by certain banks lets a customer transfer money across banks instantly. Still, this requires a person's bank account number, IFSC code and email ID, for identification.
With UPI, the need for multiple identifications will be done away with. UPI will require only a single unique identification like the Aadhar number to make the transaction.
The first phase of UPI will start next week wherein 29 banks will operate the platform.
Mobile banking has surged in India as banks have pushed both retail and corporate customers to adopt platforms designed to transact on the phone. In the September-December quarter, the value of mobile banking transactions surged 82 per cent over the same period last year.
The launch of UPI could quicken its growth further. For example, it will reduce the need for e-wallets as it will allow customers to make payments using their mobile phone as the primary device without the need to download an app to send or receive money.
Hence, you may no longer need an e-wallet if convenience is your primary focus for using the product. Also, you will be able to use multiple e-wallets seamlessly as they will become inter-operable with UPI.
UPI will make the payment system inter-operable. Hence, you will be able to use the products of any bank, even if you are not a customer, which has entered into an agreement to use the UPI platform.
And finally, UPI enables a two-factor authentication in one click. So far, for a two-factor authentication, you have to click multiple times. With UPI, you will be able to do it at one click. This system will allow for a one-click, two-factor authentication on mobile phones across bank accounts.