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21 banks to launch United Payments Interface application

The Unified Payments Interface (UPI), the new payments method that is set to revolutionise the way consumers make payments, is set to go live on Thursday.

“We will launch UPI tomorrow and we have 21 banks on board,” said A P Hota, managing director and chief executive officer, National Payments Corporation of India (NPCI), on Wednesday.

The launch was delayed by around a month from the July 31 deadline set by NPCI because some lenders were not prepared. It was also deferred because NPCI had said only lenders with 1,000 pilot customers, 5,000 transactions and 90 per cent success rate would be allowed to go operational. Initially, 29 banks had tied up, but only 21 have been able to meet the criteria. Some major lenders such as the State Bank of India could not meet the deadline.

UPI is expected to boost mobile money transfer. It will be built on the existing Immediate Payment Service that allows real-time transfer of money and is interoperable across banks.

By using this application, a customer can transfer money to another person through a unique virtual address (aliases to bank accounts allowing a customer’s account to be uniquely mapped), or mobile number, or Aadhaar number.

The other advantage is that a seller can also raise a payment request. As a result, it is also expected to be used by merchants to raise invoice requests.

Unlike wallets that users need to pre-load, UPI will work seamlessly with a user’s bank account through IMPS. A credit or debit card needs to be swiped at merchant establishment physically, or card details need to be provided in case of online shopping. With UPI, customers can shop with their virtual addresses and do not need to provide any financial detail.

According to a JM Financial report, India is still a cash intensive economy with a cash to gross domestic product ratio of around 12 per cent. According to estimates, 95 per cent of consumer transactions by volume and 65 per cent by value in India are carried out in cash. This compares with 40-50 per cent transactions by volume and 10-20 per cent by value for advanced economies. Banks and analysts expect cash transactions to come down in India over the years.