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Right time to switch to Unified Payments Interface (UPI)?

National Payments Corporation of India ( has been at the forefront of several innovations. One of such innovation is the Unified Payments Interface.

What is UPI?

Unified Payments Interface (UPI) is a simple and effective way to transfer money between two bank accounts in India by using a smartphone. UPI is built on IMPS and allows you to transfer money between two bank accounts by using a unique identifier like an email address – usually known as VPA – Virtual Payment Address without the need to know the account number and IFSC details of the beneficiary.

Why UPI? Why Now?

While there are various ways to perform digital money-transfer including but not limited to NEFT, RTGS, Wallets, NFCs - UPI is built on top of IMPS (which operates 24x7) and has been adopted by the majority of Banks in India.

UPI simplifies money transfer by masking the need to know the destination bank account details such as account number and IFSC details.

The payments can be both senders (payer) and receiver (payee) initiated and are carried out in a secure, convenient, and integrated fashion

You do not have to remember bank account details or to keep your wallets topped up. The money that remains in your account earns interest and on a need basis, you may transfer funds simply and securely.

With the Hon. Prime Minister of India taking the right steps to reduce the use of unaccounted money kept as cash by demonetizing, honest citizens may start to use UPI NOW to avoid the need to use cash. Further, unlike other solutions, the money resides in the bank account and continues to earn interest.

What is Virtual Payment Address or VPA?

VPA or Virtual Payment Address uniquely links the identity of the account holder with his / her bank account.

Typically, VPA has a format like <chosenname>@<BankName>. For example, the authors’ UPI VPA ID is digital@cnrbdigital is the chosen name and cnrb is the Canara Bank UPI VPA suffix.

With VPA, there is no need for you to share private and confidential information like mobile number, bank account number and IFSC details.

What are the pre-requisite for having UPI?

You need to have Smartphone with data connectivity. You must also have your mobile number registered with your bank and should be able to receive SMS from your bank on this number. Your account need to be enabled for mobile banking / SMS alerts to use UPI.

How do I adopt UPI?

You may download one of the UPI app from the play store:

Which App should I download?

The beauty of UPI is that you do not have to download the app developed by your bank only. You may download any of the apps listed in the play store and see which one suits you the best.

Step by Step instructions to download UPI App from Google Play Store:

1.    Go to Google Play store on your mobile

2.    Choose any one of the UPI App listed. Easiest way is to search for UPI in Google Play store and you are likely to see a list of app that you can download

3.    Registering your profile:

a.    Select one of the App listed – you may choose any of the App listed for UPI – not necessarily the app of the Bankwhere you have an account.

b.    Enter your mobile number – the app sends an SMS with OTP to your mobile phone to strongly bind the device. The objective is to verify your mobile number. The SMS may be read automatically or entered manually in the application depending on the OS capability and functionality. You may need to allow the app to have certain permissions granted if you are using Android Marshmallow or later OS. App authorizes the mobile phone on the basis the SMS received.

c.    Enter your ‘profile’ with the app and select a virtual address. It would typically be like yourname@bank. Please note that your preferred name may be taken - keep trying till you get one that is not yet taken by others. Some apps allow you to create as many virtual address as you prefer, but each of them would be linked to a single bank account.

d.   Select a password that is strong and that you will remember. App would provide option to reset password in case you forget

e.    Add any other detail as may be required by the App (e.g. Aadhar number)

4.    Register your Bank Account:

a.    Login to the App and select ‘Add a Bank Account’

b.   You may find your bank listed in a drop-down menu of Banks that are certified by NPCI to be part of UPI

c.    Select the Bank where you have your account

5.    Generate PIN:

a.    If you have not set up PIN already, the App now may ask you to select the PIN to authorise transaction. The customer may be asked to enter details from the debit card, expiry date etc.

The App now may store the account details received which will be mapped to the customer’s mobile number, VPA and Aadhaar number (if collected)

What are the possible limitations of UPI?

[at the time of writing this article (14th Nov 2016)]

a.    At present UPI is only to be used for account-based transactions – UPI is not meant for credit card transactions.

b.    The maximum value for a UPI transaction is capped at Rs.1,00,000/- which is normally more than sufficient for most transactions. This cap may vary from bank to bank.

c.    Few banks are still testing their UPI apps and may not have been certified by NPCI yet.

What are the non-financial transactions that are possible with UPI?

a.    Balance Enquiry

b.    Mobile Banking Registrations

c.    Set / Change PIN

d.   Generating OTP

e.    Checking transaction Status

How UPI benefits merchants / retailers?

a.    UPI allows for a mobile phone to be transformed into a POS device for merchants. This will democratize payment collection systems for even the smallest of merchants.

b.    Can service customers not having cards

c.    Small value transactions can be initiated as a PULL

d.   Ideal for mobile and E-Commerce

How UPI benefits Banks?

a.    Universal App for Payments

b.    Simplified (Single Click two-factor authentication)

c.    Leveraging existing infrastructure

d.   Single and Unique Identifier

e.    Opportunity to service better end customers, business customers

f.     Co-exists with other modes of payments

How UPI benefits me (end user)?

a.    Privacy: Transfer or collect payment just using the Virtual Payment Address.

b.    Both PUSH & PULL possible – both payment and collection transactions possible.

c.    Choice of single interface with multiple bank accounts

d.   No need to remember or set up Fund Transfer using the account number and IFSC details

e.    Safe and Convenient. No pre-approval of the beneficiary required.

f.     Collect Funds – Initiate a fund request – e.g. Rent collection

What are the implication of UPI?

a.    Transactions structure will change

Before UPI - Low volume, High Value, High Cost

After UPI - High Volume, Low Value, Low Cost

b.    This move will align market forces (customer acquisition) with a social purpose (financial inclusion)

c.     IMPS volumes are already higher than Debit Cards – UPI will be the game changer to catapult digital money transfer

d.    Credentials will move from CARD + PIN (proprietary) => Mobile + Aadhaar (public)

e.    The current merchant model will be completely disrupted – Smartphones will replace Cards and POS machines

f.     Everyone is an ATM, the smartphone is the Bank, self-service may become the norm, Tax collection may go up.

g.    JAM - Jan Dhan – Aadhaar – Mobile will be the catalyst for disruption

h.    India will become DATA rich nation

[Source: Research, RBI data, Presentation(s) made by Nandan Nilekani, 2016]

Who is behind this UPI?

NPCI – National Payment Corporation of India. For more information

About the Author:

Mahesh Ramachandran, is a serial and social entrepreneur. Mahesh, a Chartered Member of TiE also Chair the TiE FinTech Special Interest Group.

Mahesh is a Distinguished Sloan Fellow of London Business School and currently is the Cofounder & CEO, Commonwealth Inclusive Growth Services (

Director, Commonwealth Inclusive Growth Foundation

General Partner, Pontaq Cross Border Innovation Fund -

Mahesh Ramachandran’s entrepreneurial ventures include peer to peer foreign exchange portal, targeted advertisement, digital payment solution to under banked and unbanked segment of society.

Mahesh hails from Thanjavur, South India and has an interest in Carnatic Music, Comics and Literature.

He can be reached on


The article was written with end user of UPI in mind and primarily outlines steps to adopt UPI and switch to digital payments. UPI created by NPCI and adopted by majority of banks. The author feels NOW is the time to adopt UPI and avoid the need for physical cash.

The author wishes to acknowledge that the source for the article has been collected from NPCI website and the presentation made at the workshop for TiE FinTech Special Interest Group by Mr. Ramesh Vijaykumar, various presentations by FinTech specialist especially Mr. Nandan Nilekani.

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