UNITED PAYMENT INTERFACE

(UPI)
MIDE FINAL PROJECT
Group 2
M236-21 Bhoomika Sharma
M261-21 Mrinal Dutt
M283-21 Sagar Sankalp
M310-21 Vatsala Chaudhary
M406-21 Shubham Singh
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ABOUT UPI

Unified Payments Interface (UPI) is a platform that allows for the quick and effortless
transfer of money between bank accounts in India. It is a system that is built on top of the
existing infrastructure of National Electronic Funds Transfer (NEFT), Immediate Payment
Service (IMPS), and Real Time Gross Settlement (RTGS) systems.

UPI empowers users to send and receive money from their bank accounts using a
smartphone app. To use UPI, you will need to have a bank account in India and download a
UPI app, such as Google Pay or BHIM, onto your phone. Once account is set you can use the
app to send money to other UPI users by entering their UPI ID or scanning their QR code.

UPI is a convenient and secure way to transfer money in India, and it has become very
popular since its launch in 2016. It is now used by millions of people in India to make
payments and transfer money on a daily basis.

UPI empowers users to send and receive money instantly, 24/7, using just a mobile phone
and a virtual payment address. It also allows users to pay for goods and services online and
at physical stores by scanning a QR code. UPI has greatly increased the convenience of
financial transactions in India, and it has become very popular, with millions of
transactions being processed through the system every day.

RBI in 2012 released a vision statement which called for building a safe, efficient,
accessible, inclusive, interoperable and authorised payment and settlement system. It is
part of the Green Initiative to reduce the usage of paper in domestic payments market.

NPCI was given the task to develop a new payment system that is simple and secure. UPI
works on four pillar push-pull interoperable model where there is a remitter/beneficiary
front end PSP and remitter/beneficiary back end bank that settles the monetary
transaction for the users.
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History of Digital Payments: World

Digital payments have a long history, dating back to the 1970s with the development of
electronic funds transfer (EFT) systems. These early systems allowed for the electronic
transfer of funds between banks, making it possible to conduct financial transactions
without the need for physical checks or cash.

In the 1980s and 1990s, the development of credit and debit cards enabled more
widespread adoption of electronic payment methods. These cards allowed consumers to
make purchases and withdraw cash using electronic systems, rather than having to rely on
physical currency.

The rise of the internet in the late 1990s and early 2000s led to the development of online
payment systems, which allowed for the electronic transfer of funds over the internet.
These systems made it possible to make purchases and pay bills online, further driving the
shift towards digital payments.

More recently, the development of mobile phones and mobile payment systems has made it
even easier for people to make digital payments. With the proliferation of smartphones, it
is now possible for people to make payments using their phones, either through mobile
payment apps or by using near field communication (NFC) technology to make contactless
payments.

Overall, the history of digital payments has been one of steady progress and innovation,
with new technologies and systems being developed over time to make it easier for people
to make financial transactions electronically.

Emergence of Electronic Wallet in India

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E-wallets are digital payment systems that allow users to store, manage, and use their
money online. In India, e-wallets have been around for several years, and they have
become increasingly popular as a way to make digital payments.

One of the earliest e-wallets in India was Paytm, which was launched in 2010. Paytm
initially offered prepaid mobile phone recharging and DTH (direct-to-home) services, but it
later expanded to include other services, such as utility bill payments and online shopping.

In the following years, several other e-wallets, such as Mobikwik and FreeCharge, were
launched in India. These e-wallets offered similar services to Paytm, and they also allowed
users to make peer-to-peer payments and transfer money between bank accounts.

The proliferation of e-wallets in India was facilitated by the launch of the Unified Payment
Interface (UPI) in 2016, which made it easier for e-wallets to connect to bank accounts and
facilitate fund transfers. The growth of e-commerce in India and the increasing adoption of
smartphones also contributed to the growth of e-wallets in the country.

Today, e-wallets are widely used in India for a variety of purposes, including online
shopping, utility bill payments, and peer-to-peer payments. They are also commonly used
as a payment method for in-store purchases, as many merchants accept e-wallets as a form
of payment.

Rise of Unified Payment Interface: India

The Unified Payment Interface (UPI) is a system that allows for the transfer of funds
between bank accounts in India using a smartphone. It was launched in 2016 by the
National Payments Corporation of India (NPCI), a not-for-profit organization set up by the
Reserve Bank of India and the Indian Banks Association.

UPI was designed to make it easier for people to transfer money between bank accounts, as
well as to make digital payments for goods and services. It allows users to make payments
directly from their bank account to a merchant or recipient, without the need for a credit
card or debit card.
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To use UPI, a user must have a smartphone and download a UPI app, such as Google Pay or
Paytm, which are connected to their bank account. The user can then enter the recipient's
UPI ID or phone number, and the amount they want to transfer, and confirm the payment.

UPI has been successful in increasing the adoption of digital payments in India, and it is
now used for a wide range of transactions, including utility bill payments, mobile
recharges, and online shopping. It has also helped to reduce the reliance on cash
transactions in the country.

Data related to Unified payment interface: India

The Unified Payment Interface (UPI) is a digital payment system that allows for the
transfer of funds between bank accounts in India using a smartphone. It was launched in
2016 by the National Payments Corporation of India (NPCI), and it has been successful in
increasing the adoption of digital payments in the country. Here are some data points
related to UPI in India:

As of December 2021, UPI had over 600 million users in India.

● In 2021, UPI processed over 5 billion transactions, with a value of over INR
4.5 trillion (around $62 billion).
● The most popular UPI apps in India are Google Pay, PhonePe, and Paytm.
● UPI is used for a wide range of transactions, including utility bill payments,
mobile recharges, online shopping, and peer-to-peer payments.
● UPI has helped to reduce the reliance on cash transactions in India, as it
allows users to make payments directly from their bank account.
● The government of India has promoted the use of UPI and similar digital
payment systems through campaigns like the Digital India initiative.

CURRENT SCENARIO - GLOBALLY

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UPI payments were made possible by a collaboration between the National Payments
Corporation of India International Payments Ltd (NIPL) and Worldline, a European
payments facilitator.

By working together, European shops can use Worldline's QR code-based PoS mechanism
to accept UPI payments from Indian customers using their mobile phones. Soon, customers
from India will be able to use their RuPay debit and credit cards in shops all over the
European Union.

NIPL is responsible for NPCI's international expansion.

To what other countries is UPI available for financial transactions?

The agreement between NIPL and Singapore's Liquid Group was signed on September 13,
2021, and it will allow UPI QR-based payments to be processed in 10 countries.

With offices in Singapore, Malaysia, Thailand, the Philippines, Vietnam, Cambodia, Hong
Kong, Taiwanc, South Korea, and Japan, "Liquid Group integrates an extensive network of
merchant acquiring partners in these 10 markets," the company said.

Additionally, it was stated that beginning in early 2022, BHIM App users would be able to
make UPI QR-based payments at over 2 million merchants across North and Southeast
Asia.

Nepal

After much anticipation, UPI was first implemented in Nepal. Partnership between Manam
Infotech of Nepal and Gateway Payments Service of the United States enabled customers to
make P2P, P2M, and international payments.

Singapore

The Reserve Bank of India (RBI) and the Monetary Authority of Singapore (MAS) agreed to
connect their respective UPI and PayNow systems in July 2022.

Bhutan
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When it comes to using the Unified Payments Interface (UPI), Bhutan was the first country
to do so using the BHIM App. The Royal Monetary Authority of Bhutan received access to
UPI on July 13, 2021.

Malaysia

In 2021, UPI remittances were made possible thanks to the efforts of Malaysia's
Merchantrade Asia and NIPL.

UAE

Network International (NIPL) in the United Arab Emirates has formed partnerships with
LuLu Financial Holding, Mashreq Bank, and UPI to make UPI payments possible. Mashreq's
NeoPay introduced UPI on April 21, 2022.

France

The Lyra Network has partnered with the NIPL to facilitate UPI payments for students and
visitors.

United Kingdom

In August, NIPL and PayXpert, a UK payment solution provider, announced that QR code-
based UPI payments would soon be available there.

Oman

In October, NPCI and the Central Bank of Oman came to an agreement that will allow
residents of that country to use QR codes to make UPI payments.

Europe

UPI will be able to expand into new markets thanks to NPCI's partnership with Worldline,
including Belgium, Switzerland, and the Netherlands.

Ashwini Vaishnav, India's minister of electronics and information technology, stated in July
that three countries had signed a memorandum of understanding (MoU) with India
regarding UPI. There was France, the United Arab Emirates, and Singapore.
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It's expected that additional MoUs will be signed in the near future.

Current Scenario - India

Digital Payment Ecosystem in India

For Digital India, "Faceless, Paperless, Cashless" is a status quo goal. In an effort to bring the
whole population of India under the formal fold of digital payment systems, the
government of India has made promoting digital payments a top priority. The ultimate goal
is to make it possible for all Indian citizens to make safe, fast, cheap, and secure digital
payments.

Digital payment transactions in India have shown exceptional growth over the past three
years. P2P and P2M payments have increased thanks to the widespread adoption of simple
and fast digital payment systems like the Bharat Interface for Money-Unified Payments
Interface (BHIM-UPI), Immediate Payment Service (IMPS), pre-paid payment instruments
(PPIs), and the National Electronic Toll Collection (NETC) system. Payment methods that
have been used for a while, such debit and credit cards, NEFT, and RTGS, have also
expanded rapidly. Users now choose to make purchases using BHIM-UPI. E-RUPI, a cashless
and contactless instrument for digital payment, was also introduced by the Indian
government with the hopes of improving the efficiency of digital transactions involving
Direct Benefit Transfer (DBT). The combination of these resources has resulted in a thriving
ecosystem for the digital financial sector.
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UPI: Revolutionizing Digital Payments

UPI has been heralded as a game-changing innovation for the financial services industry.
Since its 2016 introduction, it has been the tool which is widely used in the country for
conducting electronic commerce. The National Payments Corporation of India created UPI
as a fast and easy way to send money online (NPCI). With this tool, you may connect
numerous bank accounts to a single mobile app, streamlining fund routing, merchant
payments, and other banking processes. Prime Minister Narendra Modi unveiled the BHIM-
UPI App at the start of the 'DigiDhan Mela' on December 31, 2016, to further enhance and
popularise the interface.

The Unified Payments Interface (UPI) has helped India take significant steps toward a
cashless economy by normalising digital payment methods. There were 346 active banks
using the UPI interface in August 2022, with 6.58 billion transactions of over Rs. 10.73 lakh
crores being processed.
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UPI today constitutes well over 40% of all digital transactions taking place in India. Since it
allows for quick and secure bank-to-bank transfers even for very modest amounts, it has
been a boon to small enterprises and street vendors. It also permits speedy money
transfers for migratory employees. The system is simple and quick to use because it only
involves scanning a QR code to send money. UPI has also been a rescuer during the Covid-
19 outbreak, with its use spreading rapidly due to its capacity to facilitate easy, contactless
transactions.

There is no longer any doubt that India's method of accepting digital payments has
revolutionised the country. In addition to the government's initiatives, the people of India
have shown a strong propensity for adopting cutting-edge technologies. While some
industrialised countries are having trouble sending money to their residents' accounts due
to weak digital infrastructure, India has emerged as a pioneer in the production of digital
assets and can serve as an example for many other
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countries. In addition, the government of India is making no effort to be unsuccessful in its

goal of making India the world's most efficient payments market through the widespread
use of digital payment systems. In the future, new Fin-Techs will play a crucial role in the
expansion of digital transactions by facilitating procedures that are open, safe, quick, and
inexpensive for all participants in the digital payments system.
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UPI 2.0

Unified Payments Interface (UPI) has been around for about a year and a half, and it has
already allowed for widespread interoperability in monetary transactions. The volume of
transactions increased 123 times, from 7 billion Indian rupees in December 2016 to 408
billion in June 2018, while the value of transactions increased 58 times, from 7 billion
Indian rupees to 246 million. Version 2.0 of UPI was released on August 16, 2018, marking
the beginning of efforts to shape the project into a fully featured digital commerce
platform.

Improving consumers' and investors' faith:

Improving confidence in digital transactions all over India, from payer to small merchant, is
a crucial step toward widespread adoption of digital payment methods. UPI 2.0's goal is to
alleviate problems by giving users more information about the circumstances surrounding
their transactions. The vast majority of UPI transactions to date have been P2P transfers
initiated by the payer. In UPI 2.0, merchants can include a digital invoice with a collect
request to better inform the payer of the reason for the request and drive more business on
that side of the ledger. The quick response (QR) code, which is used as a payment
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instrument to encourage digital payments at micromerchants, is another interesting

aspect. Fraudulent use of the QR code for financial transactions has been documented in a
select number of countries around the world. To alleviate these worries and encourage
more offline payments to merchants, the intent/signed QR feature was developed.

Providing unconventional credit options:

As of June of this year, there were only 3.93 crore credit cards in circulation across the
country.

3 Many consumers have difficulty gaining access to credit because of their limited credit
history. More creative products with built-in credit options for 'deferring payments' have
always been welcome. UPI 2.0's novel features, such as a one-time mandate activation and
the ability to link an overdraft (OD) account, are constructive steps toward providing such
short-term credit to those who need it. Customers would be able to use their OD accounts
as a line of credit, making withdrawals and payments even if there wasn't enough money in
the account at the time. This has the potential to significantly increase the volume of both
consumer-to-consumer and consumer-to-business transactions.

As a result, there is a sizable opportunity to market enhanced UPI as a digital lending

platform for short-term, low-dollar-amount loans that do not require a traditional credit
check of the borrower.

Salient features of UPI 2.0

● Linkage of overdraft account

● One-time mandate
● Invoice in inbox
● Signed intent and QR
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Linkage of overdraft account:

With the introduction of the Overdraft Protection Service, it is now possible to link your
overdraft account to UPI.

Customer Benefit:

● Gets a digital channel to access over-draft account.

● Instant linking of over-draft account in UPI.

One-time mandate:

You can pre-authorize (Mandate) a transaction with this function so that the funds will be
automatically deducted from your account at a later time. In situations where funds will be
transferred at a later time, but the commitment to do so must be made at this time, UPI
mandate should be used. In cases where the sender needs to create a mandate in order to
remember to make a payment at a later date, such as for a service or merchant, this feature
can be very useful. Once the mandate is carried out, the customer's account will be debited.
The UPI mandate is only valid for a single transaction.

Customer Benefit:

● Can create mandate for payments that are to be done later.

● In case of merchant payments/service, it acts as assurance to both the customer as
well as merchant.

Invoice in inbox:

Until now, the only way to respond to a collect request was to enter your UPI PIN to
confirm the payment amount and post the payment. You can now click a link on the invoice
to double-check the details of the transaction before committing to the payment. Only
purchases from trusted vendors will result in this feature being applied to the
corresponding invoices.
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Customer Benefit:

· Gets to view the bill in the UPI app, verify the details and pay the invoice.

Signed intent and QR:

A signed QR code or intent will provide the user with an extra layer of protection when
paying with either method. Problems with forged QR codes and unverified businesses will
be mitigated by using signed QR codes.

Customer Benefit:

● Will be assured of the authenticity of the receiver and will be informed if the QR is
not secured.
● Transaction shall be done faster as app passcode will not be required in case of
signed intent.

Tapping use cases:

Phase 2 of UPI's implementation has the potential to digitally transform the entire
ecosystem surrounding the platform's core payment capabilities. The updated version of
UPI and its features can be considered by financial institutions (FIs) for use in a wide
variety of P2M transactions and cutting-edge applications. Since the limit has been
increased to 2,00,000 INR, UPI transactions for more expensive goods and services are now
more feasible. Some examples of applications are shown below:
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When it comes to collecting on small-dollar loans, UPI 2.0 can be a fantastic tool for banks.
The requests for banks to collect can be generated by a cyclical process. Collect requests
can be automated, including the generation and delivery of the customer's monthly EMI
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statement. The client can review the request and give immediate approval for EMI
repayment based on the information provided.

Enhancing adoption:

While UPI 2.0 already has many improvements that make it easier for customers to make
payments and safer for them to make transactions, adding a few more can boost its
popularity. Here are some examples of possible characteristics:
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The use of UPI 2.0 in the creation of advanced digital platforms for lending and payments
has enormous potential. For instance, UPI's central mandate feature can be used as a
foundation for containers to create a streamlined transaction experience. Improved
context and information, as well as transactional data, can be obtained through UPI with
digital invoices. Invoice-level data can be aggregated and analysed to determine the extent
to which invoice-based financing is required. The next generation of digital experiences
may be at hand thanks to these creative models.

UPI 123PAY:

If you have a feature phone and want to use the secure and convenient Unified Payments
Interface (UPI) payment service, you can do so instantly with UPI 123PAY. As a result of
UPI 123PAY, feature phone owners can complete a wide variety of financial transactions
utilising one of four available technologies. Calling an interactive voice response (IVR)
number, using an app on feature phones, utilising a missed call strategy, and making a
payment using proximity sound.
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Under this payment method, there are 4 solutions going live :

UPI payment through pre-defined IVR number:

In order to begin making monetary transactions via UPI through pre-defined IVR numbers
(080 4516 3666 & 080 4516 3581 & 6366 200 200), users would need to initiate a secured
call from their feature phones to a pre-determined number and complete UPI on-boarding
formalities. The IVR's linguistic flexibility allows users to access the service in their native
tongue. IVR payments are now available at IDFC First Bank, City Union Bank, and NSDL
Payments Bank. Ultracash and Tonetag both provide support for these solutions.

Process Flow:
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Missed Call Pay:

Through a missed call-based approach, customers with feature phones can access their
bank accounts and complete regular transactions such as receiving or transferring funds,
making regular purchases, paying bills, etc., simply by dialling the number displayed at the
storefront. The customer's mobile number and the total amount owed will be stored in a
token created by the retailer at the time of billing. The customer then gives a missed call to
the merchant-provided number, and immediately after, they receive a call from 08071 800
800 asking them to authenticate the transaction by entering their UPI PIN. MissCallPay
created this service, and Bank of India is a partner in it.

Process Flow:

Feature phone where payment functionality implemented by OEM:

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Gupshup's UPI app, co-developed with Airtel Payments Bank, is a digital solution that can
be used with a basic phone. The solution providers in this case will have to work in tandem
with the OEMs of feature phones to enable a native payment app written in embedded C.
(or as supported). This UPI app has the same general layout as an app developed for a
smartphone, but it is constrained by the capabilities of a feature phone. Currently, it is able
to provide the vast majority of UPI features, with the exception of Scan and Pay.

On-boarding:

Proximity sound based technology and Voice Based Payments:

NSDL Payments Bank and Tonetag have teamed up to develop a system for making sound-
based proximity payments. Sound waves are used to enable offline, close-range data
transmission without the need for physical contact between devices. ToneTag's VoiceSe
payment solution enables users to make UPI payments to merchants by simply tapping any
phone. The customer selects "Pay to Merchant" when they dial the automated system's
main number, (6366) 200-200. When the POD's distinctive tone sounds, they tap their
phone on the terminal and enter the digit "#." Next, the user inputs the amount they wish
to pay, followed by their UPI PIN. The POD confirms the status of the transaction and
informs the user via the IVR call.

Process Flow:
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Usage of Technology Acceptance Model in UPI

The Technology Acceptance Model (TAM) is a theoretical model that aims to explain and
predict the factors that influence an individual's acceptance and use of technology. The
model suggests that an individual's intention to use a technology is influenced by their
attitudes towards the technology, as well as the perceived ease of use and perceived
usefulness of the technology.

In the case of the Unified Payment Interface (UPI), TAM could be used to understand and
predict the factors that influence an individual's decision to use UPI for digital payments.
Some possible factors that could be considered in a TAM analysis of UPI include:

● Attitudes towards UPI: This could include an individual's overall opinions

and feelings about UPI, as well as their perception of the security and
reliability of the system.
● Perceived ease of use: This could include an individual's assessment of the
simplicity and convenience of using UPI, as well as the availability of user-
friendly UPI apps and the presence of helpful user manuals and tutorials.
● Perceived usefulness: This could include an individual's assessment of the
benefits of using UPI, such as the ability to make payments directly from
their bank account, the speed and convenience of making payments, and the
ability to make payments without the need for cash.
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By considering these and other factors, a TAM analysis of UPI could help to understand and
predict the factors that influence an individual's decision to use the system for digital
payments.

Usage of Unified Theory of Acceptance and Use of Technology in UPI

The Unified Theory of Acceptance and Use of Technology (UTAUT) is a theoretical model
that aims to explain and predict an individual's acceptance and use of technology. It was
developed by Venkatesh, Morris, Davis, and Davis in 2003, and it builds upon and
integrates several earlier models of technology acceptance, including the Technology
Acceptance Model (TAM).

The UTAUT model suggests that an individual's intention to use a technology is influenced
by four key factors: performance expectancy, effort expectancy, social influence, and
facilitating conditions.

In the case of the Unified Payment Interface (UPI), the UTAUT model could be used to
understand and predict the factors that influence an individual's decision to use UPI for
digital payments. Some possible applications of the UTAUT model to UPI include:

● Performance expectancy: This could include an individual's belief that

using UPI will lead to improved performance or outcomes, such as the ability
to make payments more quickly and easily, or the ability to avoid the need to
carry cash.
● Effort expectancy: This could include an individual's assessment of the ease
of use of UPI, as well as the availability of user-friendly UPI apps and
tutorials.
● Social influence: This could include the influence of friends, family, and
other individuals on an individual's decision to use UPI, as well as the
presence of social norms or expectations around the use of UPI.
● Facilitating conditions: This could include the presence of technological
and organizational resources that enable the use of UPI, such as the
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availability of UPI-enabled smartphones and the presence of merchants who

accept UPI as a form of payment.

By considering these and other factors, a UTAUT analysis of UPI could help to understand
and predict the factors that influence an individual's decision to use the system for digital
payments.

The Unified Payment Interface (UPI) is a digital payment system that allows for the
transfer of funds between bank accounts in India using a smartphone. While UPI has been
successful in increasing the adoption of digital payments in India and has many benefits,
there are also some drawbacks to the system. Here are some potential drawbacks of UPI:

Limited acceptance: While UPI is accepted by many merchants in India, it is not accepted
by all merchants, particularly smaller businesses. This can limit the usefulness of UPI for
some users.

Dependence on internet connectivity: UPI requires an internet connection to function,

which can be a problem in areas with poor internet coverage. This can make it difficult for
some users to access UPI services.

Security risks: As with any digital payment system, UPI is vulnerable to security risks, such
as identity theft and financial fraud. Users of UPI need to be aware of these risks and take
steps to protect their personal and financial information.

Dependence on smartphones: UPI requires a smartphone to function, which means that

users who do not have a smartphone or who do not have access to the internet will not be
able to use the system. This can exclude some individuals from using UPI.

Fees: Some UPI apps charge fees for certain services, such as bank-to-bank transfers or
transactions with merchants. This can add an additional cost to using UPI for some users.
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Overall, while UPI has many benefits, it is important to be aware of these potential
drawbacks and to take steps to mitigate them.