What is Unified Payments Interface (UPI) in India

The Unified Payments Interface is a Peer to Peer payments system launched in India by the National Payments Corporation of India (NPCI) in 2016. NPCI set out with a mandate to change the face of India’s payment systems. It developed the Unified Payments Interface (UPI) as an architecture framework with a set of standard Application Programming Interface (API) specifications to facilitate online payments. The aim was to simplify and provide a single interface across all NPCI systems, thereby creating interoperability and a superior customer experience.

UPI is now one of the most preferred payment solutions in India, with over a billion transactions every month. FY22, the total transaction value processed by the United Payments Interface (UPI) platform accounted for 86% of India’s GDP. UPI’s core function is to support easy and secure money transfers between bank accounts. It does this by adding multiple bank accounts into a single mobile application, allowing for seamless fund transfers and merchant payments from one place. It also enables ‘peer to peer’ and ‘peer to merchant’ collection requests, which can be scheduled and paid as requested.

Payments can be made using a UPI ID, UPI Number, Account number, and an Indian Financial System Code (IFSC). Payment security is as per applicable Reserve Bank of India (RBI) guidelines using a 1-click 2-factor authentication where the second factor of authentication is the UPI PIN. 

UPI can be accessed on all major platforms such as Android and iOS with apps developed by members for versions of Android 4.2.2 and iOS 8.1 and above.

The primary business uses of UPI are to allow a personal mobile as the primary device for all payments, including person to person, person to entity, and entity to person. Using a personal mobile an individual can ‘Pay’ someone (push) as well as ‘Collect’ from
someone (pull). In addition, the ability to pay and collect using ‘UPI IDs’ that are ‘aliases’ to the VPA. The goal is to make  payments by providing an address without having to ever provide account details or credentials on third party applications or websites.
Also, sending ‘collect’ requests to others (person to person or entity to person) with a‘pay by’ date, which allows customers to pay at a later date without blocking the money in the account. UPI also allows for pre-authorizing multiple recurring payments (utilities, school fees, subscriptions, etc.) with a one-time secure authentication and rule-based access, similar to ECS. UPI autopay allows customers to set recurring payments for their UPI transactions. Recurring payments up to Indian Rupees 2000 can be set at the frequency desired.

This makes payments using UPI a fully interoperable system across all PSPs without having silos and closed systems with one-click two-factor authentication, using a personal
phone, and without any acquiring devices or physical tokens.

In March 2023, Reserve Bank of India (RBI) and the Monetary Authority of Singapore (MAS) launched the linkage of UPI and Singapore’s PayNow. Remittances from Singapore to India were on track to breach the $100 billion mark in 2023, making it the fourth highest remitting nation to India, accounting for 5.7% of all inbound remittances. Integrating PayNow and UPI will likely reduce charges and the time taken for such transactions.