UPI (Unified Payments Interface) is a real-time payment system developed by the National Payments Corporation of India (NPCI). It allows users to make instant payments to anyone with a bank account in India using their mobile phones.
UPI has been a game-changer in the Indian payments landscape. It has revolutionised how people make payments and helped digitise the Indian economy.
Here are some of the powers of UPI:
Instant payments: UPI payments are processed instantly, and the money is transferred immediately to the recipient's account. Speed of payments is a significant advantage over traditional payment methods, such as NEFT and RTGS, which can take several hours to process.
Convenience: UPI payments are made only using mobile phones, making them very convenient. Users do not need to carry cash or checks, and they do not need to visit a bank or ATM to make a payment.
Security: UPI uses two-factor authentication (2FA) to protect user data, which makes it a very secure payment method. 2FA requires users to enter a one-time password (OTP) sent to their mobile phone to authenticate a payment.
Interoperability: UPI is interoperable within the Indian Banking system. A very convenient payment method, users do not need to worry about which bank the recipient uses.
Affordability: UPI transactions are usually free of charge, which makes them an affordable payment method.
From the time of its launch, UPI has had a significant impact on the Indian economy. It has helped digitise the economy and made it easier for people to make payments. UPI will continue to play a pivotal role in the growth of the Indian economy in the foreseeable future, and we will see how.
Here are some specific examples of the power of UPI:
UPI has helped to increase the number of digital payments in India. In 2022, the total value of UPI transactions was over ₹80 trillion - a significant increase from ₹10 trillion in 2021.
UPI has helped to reduce the use of cash in India. The use of cash in India has been declining steadily in recent years. In 2022, the share of cash in the total value of payments was only 20%, a significant decline from 40% in 2021.
UPI has helped to make financial services more accessible to people in rural India. People do not need a bank account or a credit card but just their mobile phones to make payments.
UPI is a powerful tool that has already significantly impacted the economy, and COVID tested its natural power and reach two years ago.
From the UPI vault, behold the global innovations reshaping the digital landscape in India:
UPI One World (UPI1W)
UPI One World (UPI1W) is a prepaid payment instrument (PPI) integrated with UPI services that is specifically accessible to foreign nationals and NRIs arriving from G20 member countries. It is a cashless method of payment that allows foreign residents to make instant digital payments at various merchants across India.
Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) launched UPI One World in September 2023 at the G20 Summit in India. Transcorp, a payments solutions company, is currently offering it.
Foreign nationals can visit an authorised PPI Issuer at locations sanctioned for conducting currency exchange operations and obtain UPI1W. They must provide their passport and other identification documents and undergo a KYC (know-your-customer) process. Once the KYC is complete, they will be issued a UPI1W wallet.
Funds can be loaded in the UPI1W wallet using international currency or cards for making any merchant payments using UPI. These payments are processed instantly, and there are no charges for using the service.
UPI1W is a convenient and secure way for foreign nationals to make payments in India. It also boosts the Indian economy, encouraging more foreign tourists to visit the country.
Here are some of the user benefits of using UPI1W:
It is a cashless method of payment, which is more convenient and secure.
It is instant, so payments are processed quickly.
There are no charges for using the service.
A vast network of merchants across India accepts it.
If you are a foreign national or NRI visiting India, UPI1W is an excellent payment method. It is a convenient, secure, and affordable way to pay for goods and services.
UPI1W will benefit banks and NBFCs in the following ways:
Increasing customer base: UPI1W will allow banks and NBFCs to reach a broader customer base, including foreign tourists and NRIs from other countries.
Creating new revenue streams: UPI1W can generate new revenue streams for banks and NBFCs, such as transaction fees and cross-border remittance fees.
Improving customer experience: UPI1W will provide a better customer experience for users who want to make payments across borders.
Reducing costs: UPI1W can help banks and NBFCs reduce costs, such as cross-border remittances.
Enhancing security: UPI1W uses the same security features as UPI, a secure payment system.
Overall, UPI1W is a positive development for banks and NBFCs. It will help them to grow their business and improve their customer experience.
Here are some specific examples of how UPI1W can benefit banks and NBFCs:
A bank in India can partner with a bank in a foreign country to offer UPI1W payments, allowing their customers to pay each other without using foreign currency.
An NBFC can offer UPI1W payments to customers who travel abroad, allowing them to pay for goods and services abroad.
A bank can use UPI1W to offer cross-border remittances, allowing customers to send money to their loved ones in other countries more quickly and conveniently.
UPI Lite
UPI Lite is a feature enabled by the National Payments Corporation of India (NPCI) that allows users to make small-value payments without using a PIN. It is an on-device wallet that can pay up to ₹200 without needing KYC.
UPI Lite makes small-value payments like buying snacks, coffee, or other everyday items more accessible and convenient. It is also a good option for people without a bank account.
Users must download a UPI app supporting the feature to use UPI Lite. Users can create a UPI Lite account by downloading the app and entering their mobile number and a security PIN.
To pay using UPI Lite, users must open the UPI app and select the UPI Lite option. The app will prompt them to enter the merchant's UPI ID or QR code. Users will pay once the UPI Lite balance is confirmed.
Here are some of the benefits of using UPI Lite:
It is a convenient way to make small-value payments.
It does not require KYC.
It is secure.
A wide range of merchants accepts it.
UPI Lite is a growing payment method in India. It is a convenient, secure, and affordable way to make small-value payments.
Here are some of the critical features of UPI Lite:
Maximum transaction limit: ₹200
No KYC required: Users can create a UPI Lite account without providing personal information.
On-device wallet: Funds are stored on the user's device, not in a bank account.
Instant payments: Payments are processed instantly.
No charges: There are no charges for using UPI Lite.
UPI Lite is available on a variety of UPI apps, including Google Pay, Paytm, and PhonePe
Here is how UPI Lite will benefit banks and NBFCs:
Increasing customer base: UPI Lite can help banks and NBFCs reach a broader customer base, including those without internet access or a smartphone.
Creating new revenue streams: UPI Lite can generate new revenue streams for banks and NBFCs, such as transaction fees.
Improving customer experience: UPI Lite can provide a better customer experience for users who want to make payments in offline settings.
Reducing costs: UPI Lite can help banks and NBFCs reduce costs, such as maintaining ATMs and POS terminals.
Enhancing security: UPI Lite uses the same security features as UPI, a secure payment system.
Here are some specific examples to illustrate the benefits:
A bank can partner with a grocery store to offer UPI Lite payments to its customers, allowing them to pay for groceries without using cash or a credit card.
An NBFC can offer UPI Lite payments to its customers who do not have access to the Internet or a smartphone, allowing them to make payments for goods and services more efficiently and conveniently.
A bank can use UPI Lite to offer microfinance loans to its customers. It is allowing them to access credit more quickly and conveniently.
UPI123Pay
UPI123Pay is an instant payment solution for feature phone users in India. It is a cashless payment method that allows users to make payments without using the Internet. Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) launched UPI123Pay in March 2022.
UPI123Pay works through a four-step process:
Call: Users call an IVR number to initiate a payment.
Choose: Users select the type of payment they want to make.
Enter: Users enter the recipient's UPI ID or QR code.
Pay: Users confirm the price.
UPI123Pay is a secure payment method that uses two-factor authentication (2FA). 2FA requires users to enter a one-time password (OTP) sent to their registered mobile number to authenticate a payment.
UPI123Pay is a convenient payment method for feature phone users. It is a simple and easy way to make payments without internet access.
UPI123Pay is also a secure payment method that uses 2FA.
Here are some of the user benefits of UPI123Pay:
It is a cashless payment method.
It is a secure payment method.
It is a convenient payment method for feature phone users.
It is available in multiple languages.
A wide range of merchants accepts it.
UPI123Pay is a good option for feature phone users who want to make cashless payments. It is a secure and convenient way to pay for goods and services.
The IVR number for UPI123Pay is 08045163666. Users can call this number from their mobile phone to initiate a payment.
To use UPI123Pay, users must have a bank account supporting UPI. They also need to have a registered mobile number and a UPI ID.
Once users have set up their UPI123Pay account, they can make payments by following the four-step process mentioned above.
UPI123Pay will help create a positive impact for banks and NBFCs in:
Increasing customer base: UPI123Pay can help banks and NBFCs reach a broader customer base, including those who do not have a smartphone.
Creating new revenue streams: UPI123Pay can generate new revenue streams for banks and NBFCs through transaction fees.
Improving customer experience: UPI123Pay can provide a better customer experience for users who want to make payments using a feature phone.
Reducing costs: UPI123Pay can help banks and NBFCs reduce costs, such as maintaining ATMs and POS terminals.
Enhancing security: UPI123Pay uses the same security features as UPI, a secure payment system.
RuPay credit card on UPI
Now, customers can link a RuPay credit card to UPI. To link a RuPay credit card to UPI, the customer will need to:
Open the UPI app and go to the "Settings" or "Profile" section.
Tap on "Add Bank Account" or "Link Bank Account".
Select "RuPay Credit Card" as the type of account.
Enter your credit card details, and the OTP sent to your mobile phone.
Once your credit card is linked, you can use it to make UPI payments.
The limit for RuPay credit card transactions on UPI is Rs. 1 lakh per transaction and Rs. 2 lakh per day.
It is important to note that using a credit card for UPI payments will incur a processing fee, usually around 2% of the transaction amount.
Some of the user benefits of linking a RuPay credit card to UPI are:
It is a convenient way to make payments.
You can earn rewards and cashback on your credit card transactions.
You can avail of the credit card's interest-free period.
UPI on RuPay credit card will be beneficial for banks and NBFCs in:
Increasing customer base: UPI on RuPay credit cards can help banks and NBFCs reach a broader customer base, including those who do not have a UPI-enabled bank account.
Creating new revenue streams: UPI on RuPay credit cards can generate new revenue streams for banks and NBFCs through transaction fees.
Improving customer experience: UPI on RuPay credit card can provide a better customer experience for users who want to make payments using their credit card.
Reducing costs: UPI on RuPay credit cards can help banks and NBFCs reduce costs, such as maintaining ATMs and POS terminals.
Enhancing security: UPI on RuPay credit card uses the same security features as UPI, a secure payment system.
And here are some specific examples to illustrate the benefits.
A bank can partner with a merchant to offer its customers UPI on RuPay credit card payments, allowing them to pay for goods and services using their credit cards without cash or a debit card.
An NBFC can offer UPI on RuPay credit card payments to its customers who do not have a UPI-enabled bank account, allowing them to access credit more quickly and conveniently.
A bank can use UPI on a RuPay credit card to offer rewards and cashback to its customers, encouraging them to use UPI on RuPay credit cards for their payments.
Credit lines on UPI
How does the introduction of credit lines in UPI transactions work?
The Reserve Bank of India (RBI) has proposed allowing banks to offer pre-sanctioned credit lines to users through UPI, facilitating access to a certain amount of credit instantly, which they can use to make payments.
The credit line linked to the user's UPI ID can used to make payments to merchants, friends, and family. The credit lines will be repaid automatically, usually within a few days.
The introduction of credit lines in UPI transactions benefits both banks and users. For banks, it will be a way to increase their lending portfolio and generate new revenue. It will be a way to access credit more quickly and conveniently for users.
Here is how the process will work:
A bank will assess a user's creditworthiness and offer them a pre-sanctioned credit line.
The user will link their UPI ID to the credit line.
When the user makes a payment through UPI, the amount gets deducted from their credit line.
The credit line will be repaid automatically, usually within a few days.
The introduction of credit lines in UPI transactions is a significant development. It will make it easier for users to access credit and make payments and help banks increase their lending portfolio.
Here are some of the user benefits of credit lines in UPI transactions:
● It will make it easier for users to access credit.
● It will help users to make payments more conveniently.
● It will allow banks to increase their lending portfolio.
● It will help to reduce the use of cash.
● It will help to improve the financial inclusion of people.
The introduction of credit lines in UPI transactions is a positive development expected to benefit both banks and users. It is a step towards making digital payments more accessible and convenient for everyone.
Lending via UPI can help banks and NBFCs in:
Increasing customer base: Lending via UPI can help banks and NBFCs reach a broader customer base, including those who do not have a credit card or a bank account.
Creating new revenue streams: Lending via UPI can generate new revenue streams for banks and NBFCs through interest income.
Improving customer experience: Lending via UPI can provide a better customer experience for users who want to access credit more quickly and conveniently.
Reducing costs: Lending via UPI can help banks and NBFCs reduce costs, such as maintaining branches and ATMs.
Enhancing security: Lending via UPI uses the same security features as UPI, a secure payment system.
Here are some specific examples:
A bank can offer pre-approved credit lines to users through UPI, allowing them to access credit instantly and easily without going through a lengthy application process.
An NBFC can offer microfinance loans to users through UPI, allowing users to access credit for small businesses or personal expenses.
A bank can use UPI to offer its customers BNPL (Buy Now, Pay Later) solutions, allowing them to make purchases and pay for them later without using a credit card.
While UPI started as a disruptive new form of facilitating payments, one that banks and NBFCs found challenging to build a business model on top of - it has quickly evolved into an ecosystem of products as listed above, which, when combined, can help banks create a solid income stream from.
Hence, banks, NBFCs and other financial institutions must build a robust UPI strategy - if you need any support, we would love to partner with you on this journey.
Reach out to us today at info@executepartners.com.
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