NPCI --Know About Unified Payment Interface -UPI

Times of India : 11th April 2016 Know About Unified Payment Interface
RBI governor Raghuram Rajan and Infosys co-founder Nandan Nilekani, adviser to the National Payments Corporation of India, have today launched the much-awaited Unified Payments Interface (UPI).

While the mobile banking has been growing rapidly, mobile payments still face impediments, which the UPI seeks to address. Here’s how...

1.

What is the Unified Payments Interface?

UPI system will allow anyone with a bank account to transfer money or make payments almost as easily as sending a text message. It is a single interface across all National Payment Corporation Systems (NPCI), allowing customer to instantaneously transfer funds across different banks with the use of single identification and password. Users ac link multiple bank accounts to a single mobile application. Money can both be requested and recieved through the same interface.

2.

What is IMPS?

It is expected to make online payments much easier without the need of a digital wallet, credit or debit card. The service will run on the Immediate Payment Service (IMPS) platform. IMPS enables transactions using unique identification and mobile phone numbers without sharing any other bank details.

3.

How is different from online/mobile fund transfers?

It is an additional layer of software that connects various components of the payments system. It also brings in new features like identifying a receipt based on nicknames without sharing credentials. Today, online/mobile fund transfers require the receiver to share a lot of personal information with the sender. Also, a bank’s mobile app does not transact with other bank’s apps. UPI will address these shortcomings.

4.

How do customers access UPI services?

Banks or other parties will have to create mobile apps to provide services that are currently not possible.

5.

Why is it expected to be revolutionary?

UPI is expected to be fourth layer of the India Stack, which is a set of application programming interfaces that enable developers to take advantage of Aadhaar for eKYC, digi lockers for storing documents, UPI for payments and digital signatures for obtaining customers’ consent. These services will help businesses go digital and scale up easily.

6.

What are the hurdles?

A bulk of retail electronic payments is done via cards. These are supported by agreements with merchants, fraud analytics, and dispute resolution mechanisms. It’s not clear who will do these functions for UPI-based payments.

7.

What are mobile wallet companies like FreeCharge, PayTM doing about UPI?

Online wallet companies like FreeCharge, PayTM and Mobikwik aim to integrate their services with UPI to ensure their business is not rendered superfluos by this new platform. It is expected that in the short-term, UPI has no negative impact on wallets, if anything, it will make loading money easier.

The players believe that UPI will help in help boost the use of mobile payments which will help their business grow. Wallet companies expect this simplified interface to offer clear benefits for them to build new services.

8.

Will this not clash with the business model of mobile wallet companies?

According to some experts, once widely accepted across the banking sector, UPI could potentially challenge the business model of mobile wallets.

From Hindustan Times 14 April 2016:

Road to cashless society: Here’s how Unified Payment Interface works

• Ranjeet Rane

RBI Governor Raghuram Rajan along with National Payments Corporation of India (NPCI) adviser Nandan Nilekani launched the Unified Payment Interface (UPI) with the objective of proactively encouraging electronic payment systems for ushering in a cashless society in India. The interface aims to provide a safe, efficient, accessible, inclusive, interoperable and authorised payment and settlement system for the country.

Here is a quick guide on one of the landmark changes to take place in the financial sector.

What is the United Payment Interface (UPI)?

As the name suggests, UPI is an application level interface that aims to bring under its umbrella the multiple payment service providers presently operating in the country by adding a layer of interoperability within such platforms.

It will enable anyone with a bank account to complete a transfer or make a payment without having to share bank account or credit/debit card details. It also incorporates additional functionality of authenticating such transactions with known identifiers like Aadhaar number.

This interface is vendor agnostic, so banks, e-commerce portals or any other platform involved in monetary transactions will need to include this interface within their payment applications instead of the end users having to use multiple applications.

Why do we need a platform like this?

The record of cashless transactions in our country is very dismal. At present it stands at 6 transactions/person/year which is partly due to the fact that out of the 10 million plus retailers in India, hardly 1.1 million have card payment acceptance infrastructure. The RBI has been vocal about ushering in more cashless transactions and one of the ways to do so is to tap into the expanding smart phone ecosystem that is slated to reach close to 500 million users in next five years.

The long-term goal is to use the UPI as a means to financial inclusion by encouraging transactions among the newly added accounts under the Jan Dhan Yojana (PMJDY) and direct benefit transfer programs.

How much of a part does Aadhaar play in the UPI?

The Aadhaar system that has close to 80 crore enrolments and is now legally accepted as a form of identity for Indian residents is the backbone for authentication and authorisation in the UPI. Aadhaar authentication is the process wherein Aadhaar number, along with other attributes, including biometrics, will be submitted by the interface to the UIDAI system for verification. There is also a provision for financial institutions to integrate their Aadhaar based KYC into their applications that use UPI.

The most notable feature however is the Aadhaar Enabled Payment System (AEPS) that enables banks to route the financial transactions through a switching and clearing agency allowing citizens to authenticate and subsequently operate their respective Aadhaar enabled accounts as well as perform basic financial transactions. So essentially, Aadhaar-enabled payments architecture is an overlay on the existing payment architecture of UPI, with the task of user verification handed over to the Aadhaar repository with UIDAI.

How will transactions done under UPI work?

The interface will sit on top of existing payment system by integrating into their code. The National Payment Corporation of India (NPCI) will maintain a database of customer’s Aadhaar number, Mobile number and Bank accounts. This central repository (Central Mapper) will be used to route payment instructions based on Aadhaar number or mobile number.
 
The Aadhaar Payments Bridge System (APBS) will use the NPCI Central Mapper as a part of National Automated Clearing House (NACH) to enable government departments to electronically transfer subsidies and direct benefit transfers to individuals mapped to their Aadhaar number. Similarly, Central Mapper will allow anyone to send/receive money from a mobile number without knowing the destination account details. This is achieved by mapping mobile number to one or more accounts.

What are the main benefits of UPI?

For the end users the most important feature of UPI is the ability to make payments by providing a virtual ID without having to provide account details or credentials to 3rd party applications or websites. It would also provide the ability to pre-authorise multiple recurring payments similar to ECS (bill payments, fees, subscriptions, etc.) with a one-time secure authentication and rule based access. Payments would be more secure with the introduction of single click two-factor authentication by using a personal phone without the need of new devices or hardware tokens. Lastly, as more and more payment service providers integrate this interface in their applications it will led to a fully interoperable system across all PSPs.

What does this mean for e-wallets and bank specific mobile applications?

While the UPI platform appears to target the transactional space presently occupied by e-wallets, the fact that UPI is vendor agnostic, would allow e-wallets to integrate UPI in their application and ease the process of loading money in the applications.

Interoperability among the applications bought about by integrating UPI will indirectly led to more user friendly features getting added to e-wallets in the long run. As for bank specific applications, they should look to integrate UPI at the earliest as these will be the first applications to enable end users to avail of the benefits of UPI. Some banks like Yes Bank have already integrated UPI in their application, and early movers will definitely have an advantage.

One aspect that has not been clearly defined in UPI is that of grievance redressal.

It is expected that once the technical integrations begin, a very clear path of addressing end user issues is charted out. The ownership of transaction failure on a platform that is masking identity of the parties engages in the transaction needs to be defined on the onset. This will augment end user trust in the platform which will in turn lead to widening of the user base.

Indian banking sector should look at the UPI as the disruptive innovation that will take its service delivery to the next level while enabling financial inclusion in a single stroke and push for adopting this technology with a sense of urgency.

The author is a policy analyst in the information security and data privacy domain. Views express here are personal.

http://www.hindustantimes.com/analysis/road-to-cashless-society-here-s-how-unified-payment-interface-works/story-RdoU89mXEvdN4pYKfnGOuN.html

The unified payments interface will be available for transactions in 1-2 months-LiveMint 15th April 2016

Banks are yet to roll out the UPI-enabled service but some are currently running pilots apps. It will take 1-2 months for them to upgrade their apps and offer them to customers On Monday, the National Payments Corp. of India’s (NPCI) officially launched the Unified Payments Interface (UPI) system. The new payments system will allow you to send money through a virtual address.

HOW WILL IT WORK?

Banks will have to be linked to the UPI platform to offer this facility. As of now, 29 banks have agreed to partner with NPCI, of which 19 are already linked with UPI. The bigger banks that have linked with UPI include State Bank of India, ICICI Bank Ltd and Axis Bank Ltd, which are among the top five banks by assets as on December 2015.

To offer the new payments service, partner banks that are linked to the system will have to upgrade their existing banking apps to the UPI framework. When the bank upgrades its app, the app user will get a notification asking her to upgrade to the UPI version. Everything on the existing app will remain the same; the only change will be a UPI-enabled page on in the bank’s app.

Once the user upgrades her existing banking app, she will get an option to create a virtual address where she is filling in details such as date of birth, registered email address and mobile phone number. Virtual IDs can be created using one’s name or nickname. For instance, users of Axis Bank’s Ping Pay app can create a virtual ID similar to name@axisbank.com. One can start transacting after creating this ID. With the virtual payment address, low-value transactions of, say Rs.50, and recurring payments can be made without the need of the alpha-numeric Indian Financial System Code (IFSC) and bank account numbers.

HOW TO MAKE PAYMENTS

All bank accounts can be consolidated into one UPI-enabled app for transactions through the UPI platform. All UPI-enabled banks will allow their apps to be consolidated. So, through just one consolidated app, all payment transactions can be done.

For transactions to take place, both the sender and the recipient will have to be on the UPI platform. For the first transaction, the sender will have to go through the two-factor authentication. From the next payment, the sender can use a separate one-factor authentication, and the recipient will have to do the other one. The second-factor will be authenticated with a mobile personal identification number (MPIN), which will be a standardised 4- or 6-digit number similar to an ATM PIN.

The UPI platform is built on the same infrastructure as the Immediate Payment Service (IMPS), which is currently used for real-time transfer of money. Though the transaction limit for IMPS is Rs.2 lakh per transaction, for UPI the limit has been set at Rs.1 lakh. The cost of sending money ranges between Rs.2.5 and Rs.,5 depending on the amount which will be in the range of Rs.10 and Rs.1 lakh. The money will be transferred instantly, and the service is available 24x7.

Banks are yet to roll out the UPI-enabled service but some are currently running pilots apps. It will take 1-2 months for them to upgrade their apps and offer them to customers. NPCI states that the partner banks will be responsible for marketing UPI to their customers. NPCI believes that the new payment system will take 1-2 years to stabilise

http://www.livemint.com/Money/zLalCZMi7ZAg6lKGkYxMjL/The-unified-payments-interface-will-be-available-for-transac.html

National Payments Corporation of India (NPCI) is an umbrella organization for all retail payments system in India. It was set up with the guidance and support of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).

The RBI, after setting up the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) in 2005, released a vision document incorporating a proposal to set up an umbrella institution for all the RETAIL PAYMENT SYSTEMS in the country.

The core objective was to consolidate and integrate the multiple systems with varying service levels into nation-wide uniform and standard business process for all retail payment systems. The other objective was to facilitate an affordable payment mechanism to benefit the common man across the country and help financial inclusion.

IBA's untiring efforts during the last few years helped to turn this vision into a reality. NPCI was incorporated in December 2008 and the Certificate of Commencement of Business was issued in April 2009.

It was incorporated as a Section 25 company under Companies Act 1956 (now Section 8 of Companies Act 2013) and is aimed to operate for the benefit of all the member banks and their customers. The authorized capital was pegged at Rs 300 crore and paid up capital was Rs 100 crore. The aim is to create infrastructure of large dimension and operate on high volumes resulting in payment services at a fraction of the present cost structure.

NPCI has ten promoter banks namely, State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC.
The Board constitutes of Shri Balachandran M as the Chairman, Nominee from RBI, Nominees from ten core promoter banks, two Independent Directors and Shri A. P. Hota, Managing Director and Chief Executive Officer, NPCI.

During the last five years, the organization has grown multi-fold from 2 million transactions a day to 20 million transactions now. From a single service of switching of inter-bank ATM transactions, the range of services has grown to Cheque Clearing, Immediate Payments Service (24x7x365), Automated Clearing House, Electronic Benefit Transfer and a domestic card payment network named RuPay to provide an alternative to international card schemes. As on end-October 2015 over 220 Million Indians own RuPay cards.

BPSS at its meeting held on September 24, 2009 had given an in-principle approval to issue authorization to NPCI for operating various retail payment systems in the country and granted Certificate of Authorization for operation of National Financial Switch (NFS) ATM Network with effect from October 15, 2009.

NPCI had deputed its officials to IDRBT Hyderabad and had taken over NFS operations on December 14, 2009. Membership regulations and rules had been framed for enrolling all banks in the country as members. This was done so that when the nation-wide payment systems are launched, all would get included on a standardized platform.

A Technical Advisory Committee was constituted with two eminent professors of IIT, Mumbai. Prof. N.L. Sarda is the Chairman and Prof. G. Sivakumar is the Co-Chairman of the Technical Advisory Committee. Members in these committees are from banks at the level of Deputy General Manager and Asst. General Manager.

NPCI logos signify the speed at which the organization is achieving new milestones which adds to setting higher benchmarks to match global standards. The shades Blue, Saffron and Green represent the colours of the Indian flag that pay homage to the organization’s deep roots.

Blue is a primary corporate colour, associated with depth and stability. It indicates trust, loyalty, wisdom, confidence, intelligence and faith. Saffron radiates warmth and happiness by combining the physical energy and stimulation of red with the cheerfulness of yellow. Green implies balance, harmony and growth.

NPCI is a company that believes in transparency and clear work ethics. The open P and the liberal spaces around N and C bear testimony to this fact.

The font is stylishly slender, thus expressing flexibility and nimbleness. The letters are in italics giving it the feeling of speed and representing an organization that is swiftly embracing futuristic technologies. The fast forward symbols represent a brand that is rocketing ahead; a brand that is keeping pace with changing times to emerge as a clear winner every time.

The company logo of NPCI was unveiled at the hands of the M Balachandran, chairman, NPCI at the Board Meeting held on December 15, 2015.

Country is witnessing a revolution in the banking sector with the introduction of sophisticated public payment infrastructure and the entry of new payments and small finance banks. The country has the most sophisticated public payment infrastructure in the world which can be accessible by anybody who enters the system.

RBI Governor Mr. Raghuram Rajan  launched  Unified Payments Interface (UPI) by the National Payments Corporation of India (NPCI).

NPCI, the umbrella organisation for all retail payments system in the country, launched next generation online payments solution — Unified Payments Interface (UPI) — which will leverage trends such as increasing smartphone adoption and deeper penetration of mobile data. UPI will empower users to perform instant push and pull transactions seamlessly which will transform the way people make payments.

“Today some banks have gone live with UPI out of 29 banks that had concurred to provide UPI service to their customers. We are confident that several banks will join UPI this year and the number will multiply further.

Our focus is in line with the RBI’s vision of migrating towards a ‘less-cash’ and more digital society. NPCI has always been at the forefront to innovate and introduce new products and services at par with global standards,” said AP Hota, MD & CEO, NPCI.

Nandan Nilekani, Advisor to NPCI, said: “this is a leapfrog. It is been made possible because NPCI had built Immediate Payment Service (IMPS) platform and this is a layer we have put on IMPS. It didn’t really have the easy debit capability and that is addressed by this platform. We think with UPI coming, it is going to be an important merchant platform.”

UPI facilitates ‘virtual address’ as a payment identifier for sending and collecting money and works on single click 2 factor authentication. It also provides an option for scheduling push and pull transactions for various purposes like sharing bills among peers. A customer can use UPI app instead of paying cash on delivery on receipt of product from online shopping websites and can perform expenses like paying utility bills, over the counter payments, barcode (scan and pay) based payments, donations, school fees and other such unique and innovative use cases.

India moved a step closer towards becoming a cashless economy with the launch of National Payments Corporation of India’s (NPCI’s) unified payment interface (UPI) on Monday.

UPI, which is expected to make e-commerce transactions easier, will also facilitate micropayments and person-to-person payments.

The system will allow customers to instantaneously transfer funds across different banks with the use of a single identifier which will act as a virtual address and eliminate the need to exchange sensitive information such as bank account numbers during a financial transaction.

As a start, 19 banks have partnered with NPCI, an umbrella organization for all retail payments systems, to offer services based on UPI.

The introduction of UPI, in particular, is expected to have a significant impact on the ease of retail payments at a time when mobile banking is picking up.

In the September-December quarter, the value of mobile banking transactions surged 82% over the same period the previous year.
“There is collaboration in this revolution but there is also immense competition and the winner is the customer. We hope customer experience with developments like today’s improves tremendously and the ease of making payments, the ease of saving and the ease for buying financial products also improves tremendously,” said Rajan.

Rajan added that the improved payment infrastructure along with the launch of differentiated banking models such as payment banks are part of a “revolution” in Indian banking.

“What we have in India is the most sophisticated public payments infrastructure in the world. (But) It is not just the payments that are part of the revolution; it is a whole new set of banks that are coming in,” Rajan said at the launch of UPI.

NPCI has been working on UPI since February 2015 under the guidance of Nandan Nilekani, co-founder of Infosys Ltd and former chairman of the Unique Identification Authority of India.

The new interface is built on the same infrastructure as the Immediate Payment Service (IMPS), which is currently used by banks for real-time transfer of cash. Though the transaction limit for IMPS is Rs.2 lakh per transaction, for UPI the limit has been set at Rs.1 lakh .

“Payments have evolved in different ways. You had a card system, mobile money, Internet e-wallets. But completely mobile interoperable person-to-person instant real time with push and pull really didn’t exist anywhere. So I think that is where this is a leapfrog,” Nilekani said at the launch.

Nilekani added that UPI takes the IMPS platform—on which about Rs.2.4 trillion of transactions are conducted annually—a step further. “IMPS did not have an easy debit capability. That is being addressed by this platform,” said Nilekani, adding that just as IMPS had scaled up quickly over the last five years and has nearly 50% share of the remittance market, UPI will soon become an important payment platform for all merchants.

With the platform going live, the onus now shifts to banks to market and communicate the benefits of using UPI to their customers. Over time, bankers see applications based on UPI becoming the norm.
“In a lot of ways, cash on delivery and wallets exists in the interim until we find the final version (of payments). We are hoping that UPI will solve the last-mile final gap and make our experience for users a magical one,” Bansal said.

“Payments has been one of the biggest hurdles for mass adoption of online shopping in India. UPI has the potential of transforming the entire payments ecosystem in the country,” Flipkart CEO Binny Bansal said on 1 April.

“Just as Aadhaar has become the base for a lot of policy reform, I think UPI has the potential to dramatically change the payments landscape. The fact that you have a low-cost acquiring solution which is safe can dramatically propagate merchant acquiring across the country,”

The impact of UPI on electronic wallets is to be seen. Some people say it could mean the end for wallets—a transitory step between traditional payments mechanisms and a full-fledged digital one such as UPI—while others say it will simply make it easier to own and operate wallets.

Rajan sounded a note of caution as well and asked banking entities to improve grievance redressal systems and use technologies such as UPI to expand access to formal financial channels.
“Somewhere along this chain, a transaction may go wrong. We hope that happens rarely, but it could go wrong,” he warned, adding that NPCI should now work towards protecting the system from security breaches and fraudulent transactions.

Apart from this, the focus should also be towards bringing in those outside the payments universe and those without smartphones, added Rajan.