How UPI is changing the Digital Payments Experience

How UPI is changing the Digital Payments Experience

A day doesn’t go by without news of another digital transformation taking place. From e-commerce to online education to online travel, more and more people are shopping, learning, and travelling the digital way. To offer a frictionless digital payments experience, all these digital platforms need an efficient and cost-effective payment infrastructure. The Bharat Interface for Money (BHIM) app, launched by the Indian government in 2016, is a good example of how a government-backed digital payment system can change lives for the better. In this article, we'll explore how UPI will change your digital payments experience. You might already be familiar with some of the features we'll be discussing, such as UPI's extensive reach and its ability to provide an enhanced user experience. Or perhaps you know that UPI is interoperable and supports all major digital payments players, such as Paytm, PhonePe, and Google pay(Tez). Let's explore these and other factors that make UPI a game-changer in the world of digital payments.

Today, digital payments have become a staple of everyday life. From online shopping to bill payments, people are increasingly relying on their smartphones to pay for things. To cater to the growing demand for digital payments, the Indian government launched the Unified Payments Interface (UPI) in July 2017. UPI is a mobile-based payment system that allows users to transfer funds from one bank account to another via a mobile phone app or online. It initially supported only UPI-enabled apps and digital wallets. But in recent months, UPI has become a much broader platform for digital payments. In this article, we’ll explore how UPI will transform the digital payments experience for users, service providers, and financial institutions. We’ll also discuss the UPI app development ecosystem, the pros and cons of UPI, and the future of UPI. We will also discuss how UPI has impacted India's financial transactions and been succesful. 

What is UPI? 

UPI is a mobile-based payment system that allows users to transfer funds from one bank account to another via a mobile phone app or online. It initially supported only UPI-enabled apps and digital wallets. But in recent months, UPI has become a much broader platform for digital payments. In this article, we’ll explore how UPI will transform the digital payments experience for users, service providers, and financial institutions. We’ll also discuss the UPI app development ecosystem, the pros and cons of UPI, and the future of UPI.

How UPI Works 

UPI is a payment system that enables users to send and receive money directly from their bank account. It was developed by the National Payments Corporation of India (NPCI) in partnership with banks. UPI eliminates the need for a third-party app to transfer funds by linking the bank’s UPI-enabled app with the beneficiary’s number, hence eliminating intermediation costs in transactions.

The process is initiated by logging into one’s bank account using a UPI-enabled app and then selecting the recipient from the address book. The beneficiary will be notified about the money being transferred and will have to accept it on his/her own mobile phone before receiving it. Once accepted, this transaction becomes irreversible.

UPI App Development Ecosystem 

When it was first launched, UPI could only be used on UPI-enabled apps and digital wallets. But as of February 2018, this changed. Now, a variety of third-party merchant apps can accept payments via UPI. This means more people will be able to use UPI to pay for goods and services without having to open a bank account or download an app.

However, despite the initial success of UPI, the app development ecosystem has been slower than expected. This is mainly due to the difficulties in integrating with banks. Nevertheless, there are many companies that have already integrated with the UPI platform and are ready to provide both merchants and service providers with easy access to payments via UPI. These companies include One97 Communications Limited (which operates Paytm), Fino PayTech Solutions Pvt Ltd (which operates PhonePe), Equitas Holdings Pte Ltd (which operates MobiKwik), Hike Messenger Limited (which operates Hike Wallet), National Payments Corporation of India Limited (NPCI) - which developed BHIM app - Oxigen Services India Private Limited (OxiGEN), and Google Inc.

UPI: The Good, The Bad and the Ugly 

The Good:

- UPI has a digital identity system to enable secure transactions.

- It will be a boon for small businesses as they can use UPI for payments and money transfers.

- The government is encouraging the shift to digital payments, so it is likely that we’ll see many more companies supporting UPI in the near future.

The Bad:

- UPI doesn’t support all banks yet and only accounts with Indian banks have access to the system. 

- Merchants who earlier accepted cards are now resistant to accepting digital payments, especially after the recent RBI guidelines on card acceptance charges. 

The Ugly: 

Online frauds are expected to rise due to UPI’s lack of authentication processes, which could be offset by stronger eKYC norms for KYC verification of customers.

Final Words: Should You Use UPI for Your Next Payments Project?

As digital payments continue to grow, it’s important to keep up with the latest changes in technology. UPI is a cashless payment system that offers several benefits and can be used for any type of transaction.

Continuing its upward trajectory, the Unified Payments Interface (UPI) clocked 4.22 billion transactions in the month of October, registering an growth from 3.66 billion transactions withinside the previous month. The corresponding transaction fee additionally spiked from Rs. 6.54 lakh crore to Rs. 7.71 lakh crore. This changed into the primary month whilst the UPI crossed $ 1 hundred billion in transaction fee because its inception. The tale of UPI is likewise a testomony to the fulfillment of Digital India, specifically after the demonetisation of 2016. What changed into as soon as touted as a platform that could most effective cater to three city pockets, has quick become the charge interface for India, from shoppers to sellers, from traders as massive as jewellers to as small as coconut sellers. From this it is clear that UPI is used extensively all across India, so I would suggest you to use UPI for your future online payments, as it is backed by the Indian Government.

 But, If you’re considering using UPI as an alternative payment method or developing your own UPI app, it’s important to do some research first. The Indian government has released a set of guidelines that outline best practices for UPI apps and how they should be designed.

Review these guidelines before starting your next payments project to make sure you are following best practices.