Since its inception in 2016, the usage of the UPI system has exploded, with the non-bank players rapidly entering the payments space. In addition, the UPI payment offers and other benefits that acquired more users further fuelled the growth in UPI payments over the years.
According to the NPCI reports, the total number of transactions was 955.02 million on the UPI Platforms as of September 2019. The UPI payment applications offer rewards to their users in the form of cashback and rewards points after every purchase. In addition, they can earn UPI Payments cashback offers whenever they shop, pay bills or make mobile recharges.
What are UPI Applications?
The Unified Payments Interface (UPI) is a set of standard APIs offering a couple of services- pay (push) and collect (pull). The UPI system enables the operations using the virtual payment address for each transaction party. Every customer using the UPI for receiving or making payments interacts with three key entities- the UPI apps installed on the users' smartphones, their banks, and the Payment Service Provider (PSP). The banks and the PSPs interact with the UPI APIs maintained and hosted by the National Payment Corporation of India (NPCI).
The UPI applications have links with the PSPs and embed the functionalities of PSP within themselves.
Requirements for Using UPI Applications
For using UPI applications and earning UPI payment offers, you must have a bank account with a member bank in India. The UPI app offers a facility that is only available to members of member banks. If you are unsure if your bank is a member bank, you can contact your bank for inquiry or check in the partner bank associated with the UPI application. After checking whether your bank supports the UPI payments, you need to download the application on your smartphone. Log in with the mobile number linked with your bank account for verification purposes.
Step to Set Up UPI Payment Applications
Setting up a UPI application is easy if you follow the systematic guidelines:
Install a good UPI payment application from the Google Play Store or Apple Store.
Select your preferred language, verify your mobile number and select the bank where you have an account.
Create your profile by entering the essential details like your name, virtual ID, and password. The virtual ID is your payment address.
Finally, create a Pin. It is a password required during a transaction.
How Does UPI Transact Money?
Suppose you are ordering your favorite cuisine from the best eatery in town through a food delivery application. After choosing the dishes, here's what you have to do:
Select UPI payment method.
You will get a list of multiple UPI applications. Choose the application on which you've already registered.
You will be redirected automatically and securely to your chosen application.
Here, you get all the details, including the virtual payment address (VPA), the payment amount, and other details pre-entered as you redirect from the food delivery application.
You must confirm the amount and enter the authentic details, consisting of two authentication sets (popular as two-factor authentication).
The PSP enables the first authentication, which is more like a screen lock code or application PIN.
The other one is your UPI PIN, the standard security measure. Once you enter your passcode and PIN, the payer PSP receives the information.
You will get a confirmation about the successful transaction and a notification on your phone stating successful payment. Besides the notification of successful payment, you receive another notification about the rewards you earned on your UPI application. It can be in cashback or vouchers that you can redeem while shopping with shopping brands. Usually, the apps send rewards after every purchase made by the users, and the rewards come hidden under scratch cards valid for a specific period.
You find yourself redirected to your food delivery app as the payments process gets over. The app confirms that they received your payment and informs you that your order is on the way. Of course, these steps take place within a few seconds.
Since its launch in 2016, UPI emerged as the first step for India to move towards open banking. It marks a paradigm shift enabling the opening up of customers' financial lives as it provides access to banking infrastructure and data for start-ups. As a result, it emerged as a better outcome for all the industry participants, especially customers.