What is UPI and how does it work ? What are the benefits of UPI
The use of UPI in India is for the transfer of money in real time from people to people. it is the largest mode of transfer for money used by Indians. The benefits of UPI is its fast, safe and convenient.
The full form of UPI is Unified Payments Interface. It is an Indian real-time payment network system. It is one of the largest things which has completely transform the payment system in India. India has heavily benefited from UPI and this revolutionary thing has took India to world's no. 1 spot in Real TIME digital payments. Let's see how UPI has benefited India and the way Indians transfer money with UPI.
Also read :- What is the structure of Indian Union Budget ?
THE HISTORY OF PAYMENTS PROBLEM IN INDIA
Let's go back to the past decade in the 2010s era, people used to have credit cards and debit cards with them and almost 1 crore ( 10 million ) shopkeepers used the POS machines nationwide but there were a lot of problems which were faced by the people :-
1. Complexity - Everyone didn't used any debit cards or credit cards neither all the shopkeepers used to have POS machines so in case if they need to do any digital transactions they would have to ask for the bank account , the IFSC code and the bank name of the shopkeeper which somehow was a very hectic process to do for a single transaction.
2. Charges - The merchants provider company's of the debit cards used to charge 2% flat on each transaction done by the customer so it was not possible to do small scale transactions by debit card as it used to cost huge for small shop vendors and also customers didn't preferred to pay any extra charges for small amounts.
3. Frauds - There were many reported cases of card stealing, card swapping, OTP scam in which many people lost huge amounts of money from their bank accounts and many of them even lost their life because of the depression so it was not common for everyone to carry credit cards and debit cards wherever they go.
So to solve these problems, NPCI (National payments corporation of India) introduced the IMPS network in 2010 which provided little comfort to the people as now it became easy to transfer money up to 2 lakh easily from the bank accounts but then also it was not very common to be used publicly. People used it for business purposes or for any emergency or official purposes only.
NPCI then in 2016 launch the UPI (UNIFIED PAYMENTS INTERFACE ). it is the payment network which runs on the existing IMPS network in India . UPI changed the way Indian's transfer money completely and moreover it was more boosted after the Internet revolution in India brought by the the Indian billionaire Mukesh Ambani's JIO Infocom.
WHAT ARE THE BENIFITS OF UPI ?
1. INTERCONNECTIVITY - Earlier people used to ask for the bank accounts, IFSC code and other bank details for the transfer of money but now UPI on behalf of us gets all the bank details saved in its network . now we don't need to enter any bank details for every time we use UPI. It is like a personal assistant to us who transfers and withdraws money from our bank account with our one click .
2. Security - It is secured by the dual factor authentication and works under the RBI(Reserve Bank of India) regulations and NPCI (National payments corporation of India) supervisions. It keeps our bank details in its system and gives us an unique QR code and generates our unique ID for every single person known as " UPI ID" . we can show this to any person we want to ask money from or we can send any person the money ,just buy scanning their QR code or entering their UPI ID in our Smartphone. So the money gets directly from our bank account to the receiver's bank account just by Scanning their QR code or Entering their UPI ID which makes it super safe for the people as their bank details are NOT exposed to anyone. "UPI ID'S" and "QR CODE "are solely for receiving money, only the money gets in through this code so there is no chance of getting "Scammed" .
3. Availability - UPI is available 24/7 and all across the country. Even it is now available in foreign countries such as Dubai.
4. Charges - There is 0 charge on transfer of money through UPI. There is a limit on transfer of money up to 1 lakh in one day and that to free of cost. There is also no limit in the number of transactions you do in a day. so it is actually free of cost service and is super reliable by the common people.
So as it is the service free of cost and super reliable and simple, Indians use it heavily in their day to day transactions and has now it has become lifeline for all the Indians for transferring money. Today you can buy an Apple fruit from a street vendor to an Apple iPhone from a City Mall all by UPI !
After the arrival of Jio in 2016, there was heavy downfall in the data prices in India which helped the middle class people to get connected to the internet and then after that UPI achieved new heights.
HOW INDIA BENEFITED FROM UPI ?
1. UPI helped people to travel hassle free without carrying wallet so people by doing digital transactions , where tension free of any scams which earlier used to occur because of debit cards .
2. Small business vendors heavily profited as the customers directly were able to send money from their bank account to their vendors bank account just by one click from their smartphone. during the pandemic times in 2020, there was lockdown everywhere and people were hesitant to use cash so instead of that people transferred money digitally from their smartphone to the vendors and they easily got all their things home delivered without any point of contact !
3. It helped to reduce the burden of carrying cash and moreover RBI had to change currency notes earlier because of "wear and tear" which has now become very less as most of the transactions are digital due to UPI. this also saves environment .
4. In 2022, UPI has launched the service of transferring money without the use of internet and now from a 2G smartphone which was majorly held by the lower middle class people can also now transfer money from their phone without the internet !
CAN UPI CHANGE THE WAY PEOPLE TRANSACT INTERNATIONALLY ?
Today there is a "swift code" network which is used for the international transactions and the stats currently stand at 30 million transactions per day where banks charge heavily with up to 25 to 65 dollar per transaction from the customers. Moreover it has also got some reliability issues such as exchange fees, convenience fees , delaying in processing ! if UPI is accepted globally then people can transfer money anywhere in the world in real time with far less charges .