The Role of UPI in Digital Payments

By Srinivas Nidugondi,Senior Vice President & Head - Mobile Financial Solutions, Mahindra Comviva


Srinivas Nidugondi,Senior Vice President & Head - Mobile Financial Solutions, Mahindra Comviva

The newly launched Uni­fied Payments Interface (UPI) is anticipated to make mobile payments much easier. But still there’s a lingering question: What changes will UPI bring to the mobile payments? The question becomes all the more important since it also makes use of the same IMPS (imme­diate payment service) platform that is being used by all existing mobile payment platforms. Let’s discuss it here.

What is UPI (Unified Payments Interface)?

UPI or unified payment interface is a payment architecture with a set of standard app APIs by the Reserve bank of India in order to facilitate the next-gen online immediate payments leveraging trends like increased smartphone adoption, increased app downloads and universal access to data and internet.

How does UPI Payment Work?

Any smartphone user having a sav­ings or current account with a UPI-partnered bank can download the an­droid app to make P2P (peer-to-peer) and P2M (peer-to-merchant) pay­ments with the use of VPA (virtual payment address)

All that needs to be done for mak­ing a UPI payment is – download the app, set the MPIN, create your VPA and link any bank account from the financial service provider that has partnered for the UPI service.

Thus, in this case the customer does not need to disclose any sensi­tive information like bank account number or IFSC code for completing a financial transaction. It eliminates the requirement of entering one’s card details like number, CVV code, expiry date or OTP.

The Benefits of Unified Payment Interface for the Economy

UPI is a big leap for the payment sys­tem in a growing economy like India, enabling the customers to transact without paper money and shelling out a number of benefits:

1. UPI is anticipated to make the payments system completely in­ter-operable across all payment systems removing simplicity ar­bitrage by enabling one click two factor authentication.

2. It will catalyze high volume, low cost payments, creating a new eco­system that billers/billers may adopt in order to offer simpler UPI offering to the customers.

3. UPI is expected to significantly benefit the banks as the service can be provided by the financial service provider to the merchant even with a basic smartphone. The need to PoS machine installation at the place of business is completely eliminated. Thus, it can reduce the merchant ac­quisition cost by providing a viable solution having long term benefits.

4. Wider audience can be served by offering a ‘collect’ feature in turn im­proving the entry barrier for smaller businesses and startups.

5. UPI, as an innovation in the mo­bile payment space will bring all the key stake holders including mer­chant, consumer, and banks or finan­cial institutions on a common plat­form, creating an array of services still unheard in the global payment offering space.


Unified payment interface is a big step in terms of achieving a cashless econ­omy. The move arrives as a boost to an economy where the number of mobile wallet players and ecommerce sites is increasing. UPI will soon make e-com­merce transactions easier alongside facilitating micropayments and per­son-to-person (P2P) payments.Thus, considering their simplicity, openness and convenience, UPI payments fit in well with the move to migrate towards a cashless and digitized economy.

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