UPI Payments

A brief explanation.

Unified Payments Interface

Introduction

NPCI (National Payments Corporation of India) a not-for-profit organization functions under RBI (Reserve Bank of India) and IBA (Indian Bank Association). It was launched in 2008 with an aim to handle and transform payments in India.

One of the prominent services of NPCI includes payments through UPI, launched in 2016 (the same year Demonetisation happened).

UPI (Unified Payment Interface) is a payment system built on IMPS technology to enable instant transfer of money between bank accounts using a VPA (Virtual Payment Address)or UPI id without having to use bank account or debit/credit card details.

There was clearly a large scope in retail payments to be digitized across after UPI’s launch since it enabled a large base of payer and payee to get onboard. Imagine one being a small merchant, wouldn’t be comfortable in sharing their bank account details with you for a nominal transaction but instead, a mobile number or an email id wouldn’t be much big of a deal with also saving you from that “cash change hassle”.

Some of the Key Features -

1. UPI is a big step towards a cashless economy.
2. Mobile number linkage to the bank account can be considered as the core of enabling UPI payments.
3. A user with multiple bank accounts can generate multiple VPA and get paid on or pay through any address, the linked account will get credited or debited respectively.
4. If one mobile number is linked to multiple bank accounts then one UPI app can be used to generate multiple UPI ids. And if more than one mobile number is linked, then there could be a need to use more than one application. In short, one app per mobile number.
5. Banks acted as the payment service provider of UPI, hence they were responsible for assigning UPI handles to users. For instance, Applications that were powered by a bank, assigned a UPI handle to its users. For instance, yes bank powered PhonePe, so all PhonePe users had a UPI handle of XXX@ybl.
6. Payments could be done by a UPI id, mobile number or a QR code.
7. Most of the payments done using UPI are peer to peer.

UPI 2.0

NPCI (National Payments Corporation of India) launched an upgraded version of UPI in August 2018 — UPI 2.0. UPI 2.0 has emphasized more on peer-to-merchant spheres, unlike the previous version which focused on peer-to-peer transaction base. This approach has unleashed enormous opportunities for small and big merchants to shift from the traditional POS system to a contactless POS system. This is the reason why banks are facing disruption in their POS device business. At the time of the launch UPI 2.0 was supported by 11 banks.

Some of the key features of UPI 2.0 -

1. Now the users will be able to link their overdraft accounts to UPI, earlier only current and savings accounts were allowed.
2. UPI mandate enables a user to pre-authorize a transaction and amount debits from the account at a later date.
3. Users will be able to view the invoice of the purchase before approving payment on their UPI apps.
4. Payers will be able to check the authenticity of the merchants, if they’re a verified UPI merchant or not.
5. Increased transfer limit of up to 2 Lakhs.

UPI Integration

Suppose you’re a merchant, looking to facilitate payments in your app and would like to make “pay via UPI” as an option for your customer. How can this be achieved? What are the options do you have, to integrate this payment service into your application? This article talks about exactly that.

A customer while checking out from an e-commerce website after shopping, sees a list of online payment options on the screen and “UPI” is one among them. When this happens it means, that the e-commerce website has UPI payment integrated into its system. That is UPI integration in simple terms.

How does one get UPI integrated?

1. Choose a Payment Service Provider. (Banks, UPI Payment Gateways, UPI apps)
2. These PSPs will provide UPI integration kits to integrate into your application.

There are independent open source SDKs available which are capable of enabling UPI service in your application.

Which PSP is best for me?

Choosing a Payment Service Provider is the only work here. While banks are the primary service provider, UPI payment gateways provide you a simple and quick integration with all the work handled by them. There are different kinds of checkout flows available too, to chose from like web-flow, intent-flow, etc.

There is an amazing article written by Cashfree in which they’ve listed a few pros and cons of various PSPs and detailed various checkout flows. It is a must-read.