Raghuram Rajan gives a parting gift, turns your smartphone into a bank with UPI(Unified Payment Interface)

NEW DELHI: India moves a step closer to becoming a cashless economy this month with the launch of unified payment interface (UPI), the brainchild of RBI governor Raghuram Rajan.

The application, a move that will revolutionalise peer-to-peer payments and will be made available on the Play Store for download, will help the track cash flow and collect tax accordingly.

The payments process which was launched by Rajan on April 11 in Mumbai was in the final stages of integration and testing with the banks and the National Payments Corporation of India (NPCI), according to an ET report.

So, how does this work?

Built on the same infrastructure as the Immediate Payment Service (IMPS), all that you need is a smartphone. Once you register for UPI with your bank, a unique 'virtual address' will be created. This is mapped with your mobile phone. The app will allow users to pay for transactions as low as Rs 50 and go all the way up to Rs 1 lakh. Payments can be made between friends, to merchants and even to delivery boys instead of doing cash on delivery.

Cash on delivery, the big driver behind the ecommerce boom, will probably die a natural death for people with smartphones. They can use the UPI app to pay after receiving the goods.

All they need to know is the unique ID of the ecommerce firm.

The biggest impact of this app will be on third-party payments. The UPI app does away with IFSC code and bank account number and branch detail requirements, once UPI is in place.

You just need the receiver's unique ID. Open the UPI app, select the amount to be paid, add the unique ID of the beneficiary and select 'send'. The app will ask for a mobile pin to authenticate the payment.

You don't need an account with that specific bank to be able to use its UPI app. All you need to do is to download that bank's UPI app, register yourself and make the payment.

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

As of now, 29 banks are a part of the UPI network, out of which 15 major banks have already integrated the interface into their smartphone apps. These banks include ICICI Bank, Axis Bank and few others. However, India's largest lender State Bank of India (SBI) is yet to have an UPI app but they have said that they are in the process of developing the application.

UPI can be used for grocery shopping at the supermarket, or online shopping as well. It will eliminate the need of entering card details such as number, expiry date, CVV code and OTP.

UPI decoded

1) UPI is integrated with your bank's app

2) Once you register, a unique 'virtual address' will be created, which will be mapped with your mobile phone.

3) You can pay for transactions as low as Rs 50 and go all the way up to Rs 1 lakh. Payments can be made between friends, to merchants and even to delivery boys instead of doing cash on delivery.

4) All you need is the unique ID of the ecommerce firm.