Unified Payment Interface


  • The ratio of cash to gross domestic product in India is one of the highest in the world
  • The number of currency notes in circulation is also far higher than in other large economies
What is Unified Payment Interface(UPI)?
The Unified Payments Interface (UPI) is a new system developed by the NPCI and the RBI to aid instant transfer of money using a cashless system. Using UPI services, one just requires a smartphone and a banking app to send and receive money instantly or to pay a merchant for retail purchase. In the long run, UPI is likely to replace the current NEFT, RTGS, and IMPS systems as they exist today
How will it help
  • Rapid payments to facilitate money transactions on websites, bill and even to a friend
  • The security added to it will help in engaging more bank customers, small and medium entrepreneurs
  • In UPI, money transfer is possible in both send mode and collect mode. The present system of mobile payments offers only send mode. A merchant or an individual can send a request to the UPI user for money which will be transferred after the user’s approval. The difference with the present system is that, the person who is sending is not initiating the action.
  • This would end the need to have different wallets for different e-commerce sites. Complete interoperability is what the UPI platform aims to achieve.
Objective – To provide a infrastructure for next generation payment option in Indian languages through Universal accessibility of Internet and data.
Significance of UPI –
  1. Economic Significance – 
    1. Boost to commerce and businesses- This will help in boosting commerce especially e-commerce.
    2. Less Financial Burden for printing notes and distribution- Central banks have to incur less cost in printing, circulation and maintenance of physical currency.
    3. Easy to trace transaction- Transaction through UIP will be traceable easily, therefore it will ease the tax collection and will curb the parallel economy.
    4. Financial Inclusion and Better economic management- Welfare schemes and Adhaar No. attached with UIP can lead to better financial inclusion.
  1. Strategic Significance– Cashless transaction through UIP can help to address the issue of black money, tax evasion, money laundering can be tackled to big extent.
UIP can be used for e-commerce and daily business purpose transactions, money transfer, remittances etc. On the other hand, UIP can be used in various welfare schemes like Pradham Mantri Jan Dhan Yojna etc.
In a nutshell it brings last mile transactions over a trusted technology platform which is totally made in India.
“The Unified Payment Interface (UPI) is a radical step forward that could help take financial inclusion to a new level.” Examine. (200 Words)
UPI is launched by National Payments Corporation of India (NPCI) for enabling swift payment of goods and services and fund transfer.
UPI taking financial inclusion to new level:
  • Its another leap forward in the financial inclusion and cashless economy which has potential to tap a substantial amount ofmicro transaction.
  • It creates a unique “virtual UPI ID” by integrating the Aadhar no. and Bank account which facilitate hassle free swift money transfer without additional information using a smart phone.
  • The Interface is simple and handy which would enable people to use the service even through a text message. Hence more people would be able to use digital platform for money transactions especially rural population.
  • Rural micro-transactions could be better traced with UPI in place.
  • The digital literacy is still moving at snail’s pace
  • Phishing and data theft are gigantic problems still to be dealt.
  • The Encryption protocols and infrastructure is not at par with developed nations rendering the whole digital transaction system vulnerable to “e-Loot”.
  • The service require internet connection and a smart phone, but presently, huge population does not carry a smart phone and internet penetration in rural India is questionable.
  • One of the biggest challenge is providing the content in regional languages without which the success of UPI would be more or less a “glass half filled”.
However, India is known for its IT services and the Digital India campaign is the corner stone for augmenting the UPI. Its high time for India to leverage her IT expertise and develop a suitable PPP model for implementation of UPI.



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