UPI: The Tech Driving India’s Payment Revolution
Anusha
When was the last time you withdrew most of your cash to have a stack of notes on hand? Or checked your wallet to make sure you had enough physical money with you?
Since the moment we gained the luxury of leaving the wallet behind and relying solely on our phones, we haven't looked at cash transactions quite the same way.
While we've long enjoyed the convenience of cashless transactions with credit and debit cards, the rise of UPI has transformed the landscape like never before.
Since the pandemic, I’ve been amazed at how swiftly the entire nation has embraced this technology and made it a part of everyday life.
UPI: Unified Payments Interface
UPI is an instant payment system and a protocol developed by the National Payments Corporation of India (NPCI) back in 2016.
Prior to UPI:
We navigated the world of digital banking with NEFT (National Electronic Funds Transfer) and RTGS (Real-Time Gross Settlement). While effective, these methods weren’t exactly instantaneous and had their fair share of user-unfriendly challenges.
Then came IMPS (Immediate Payment Service). It offered real-time payment capabilities but still required us to juggle a myriad of banking details like account numbers and IFSC (Indian Financial System Code) codes for even the simplest transactions.
Enter UPI:
This is built on top of IMPS but is much more user friendly given the fact that we don’t need to struggle finding any sort of banking information for a payment. UPI instead utilizes a Virtual Payment Address, or a QR code or a UPI ID to enable a transaction.
So, what exactly is a Virtual Payment Address (VPA)?
Think of it as your personal digital payment ID—an exclusive identifier linked to your bank account that makes transactions secure and convenient. It looks something like this: abc@bankname. No more fumbling for account numbers; just your VPA and you're good to go!
Alright, so what’s the big deal with UPI?
UPI simplifies transactions between multiple banks by utilizing APIs (Application Programming Interfaces) to facilitate seamless communication.
And let’s not forget the MPIN you enter to ensure authenticity! UPI employs multi-factor authentication along with robust encryption to make each transaction more secure.
So, how does a UPI transaction actually work?
UPI transactions can be categorized as either "push" or "pull." In a push scenario, like when I send money to a merchant, or a pull scenario, where a recipient requests payment.
Let’s dive into a push transaction. Imagine I want to send ₹1,000 via PhonePe from my Axis Bank account to a shopkeeper.
First, I open my PhonePe app and scan the shopkeeper’s QR code, which fetches their Virtual Payment Address (VPA). Next, I enter the amount and my secure PIN.
Once I hit send, Payment Service Provider receives my request, which is then routed to NPCI, the regulatory authority overseeing UPI transactions in India.
Once the request is verified, Axis Bank validates my transaction and its authenticity. They then authorize the transaction by generating a digital signature to ensure security.
Payment Service Provider then shares my banking details with the UPI system, triggering NPCI to validate and deduct the amount.
Finally, the shopkeeper’s account is credited almost instantaneously, and I get a notification on my phone confirming that the transaction is complete.
And that’s how it works—the UPI loop in action!
Now, let’s dive into the intriguing part: How does this puzzle piece fit into any website or mobile application? Well, we have a few options! The recipient's UPI ID can be used for money transfers. It operates as an open-source API and is regulated by the Reserve Bank of India (RBI).
- Paytm informs us about JS Checkout, which is a client-side JavaScript library designed for a fast and seamless checkout experience.
Then we have the UPI Intent Flow, allowing you to conduct transactions using any Payment Service Provider (PSP) app installed on your phone. Building on this is the UPI Smart Intent Logic, which verifies that the applications are UPI payment-ready (meaning your account is logged in and UPI onboarding is complete). The code needed to integrate this functionality into your application is readily available online.
Additionally, if you’re using buttons to invoke these actions, you can use anchor tags to launch UPI apps. For example:
<a href="upi://pay?pa=upiaddress@bankname&pn=payeename&cu=INR">Sample Button</a>
In this code, pa refers to the Virtual Payment Address (VPA) of the payee, while pn refers to the payee's name.
- Lastly, the Paytm Custom UI SDK supports apps built on both native and hybrid frameworks, enabling you to create a Payment UI that utilizes POST APIs such as the OAuth Token API, Initiate Transaction API, Fetch Payment Options API, and Transaction Status API.
In a world where cash is becoming a relic of the past, UPI stands as the superhero of digital transactions—swift, secure, and smart! However, the security of these apps demands constant innovation. I wonder what tomorrow will bring: perhaps blockchain technology for transparent transaction records, dynamic QR codes, or even behavioral biometrics that analyze user patterns such as typing speed and touch pressure?
I guess we’ll just have to gear up and wait for tomorrow!
Here’s to a future of even crazier innovations—let’s hope my wallet doesn’t become sentient,
Anu
And for anyone who likes to do homework, here are a few links you can go through:
https://razorpay.com/blog/what-is-upi-and-how-it-works/#How_is_UPI_Different_from_IMPS
https://razorpay.com/learn/what-is-virtual-payment-address-vpa/
https://business.paytm.com/blog/how-to-integrate-upi-payment-gateway-in-website-mobile-app/
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