State Bank of India, India’s largest bank, has started accepting UPI payments from customers of other banks.
However, outgoing payments are yet to be enabled from an SBI account to other accounts.
UPI refers to a new way of making instant payments.
Instead of entering details such as bank account number and IFSC code, Unified Payments Interface requires only a small identifier similar to an email address.
For example, a person can have an ID like ‘sanjay@sbi’. With this ID, he can send and receive money from any other person and make payments at shops and in taxis and other places.
All that he has to give to others to enable them to send money to him or charge him for services is the above ID. There is no need to share bank account details or any other difficult-remember data.
Around two dozen banks in India have already enabled all their accounts to both send and receive UPI payments.
The platform is ‘open’ and any accredited software company can create applications that use this payment mechanism. However, they have to pass certain security requirements.
Many third-party applications, such as Trupay, Nupay, UPI PAY, UPI-Split Bill, TarangUPI, Alphapay and UPI Social have already been launched on the Android Play store to take advantage of the new facility.
In addition, Flipkart has come up with Phonepe, while ICICI Bank has come up with Pockets and Federal Bank has brought out Lotza.
Many banks, such as Axis Bank and Vijaya Bank, has also brought out their special UPI apps as well, while ICICI Bank has added this feature to its main application — iMobile.
SBI has not brought out its payment app, but is expected to do so in another two weeks.
The new system is likely to cause some pain to companies like Paytm and MobiKwik, which have been busy creating their own proprietary platform.
However, unlike proprietary platforms, an open technology allows any qualified software maker to create apps around it.
In addition, the fees and charges involved are also not determined by one private player, but by the National Payments Corporation of India — a government controlled body with representation from most banks.
Other than SBI, most other banks have enabled both incoming and outgoing fund transfer.
To try this out, install any UPI app, such as those by UCO Bank or SIB M-Pay or Maha UPI or PhonePe. Verify your mobile number, and then click on ‘add account’. You will be allowed to create a virtual payment address similar to an email ID for each account you hold.
Once this is done, you will be asked to set a 4 or 6 digit secret code for outgoing transactions. Everytime the app is used for making an outgoing transaction, you will have to enter your secret 4 or 6 digit PIN.
Some apps also support making merchant payments.
To pay using this facility, you have to give the merchant your payment ID. The cashier enters this ID in his machine, and you get a prompt on your mobile phone asking you whether you want okay the transaction. If you click on ‘Yes’, you will be prompted to enter the 4 or 6 digit PIN and the transaction goes through.
The main advantage of the system is that unlike using a Visa or MasterCard, the cost involved is only a few paise. In case of typical credit card transactions, the card networks and the banks charge around 2% of the total transaction value as commission. So, if the transaction is worth Rs 4000, a total of 80 rupees goes as transaction charge, while in UPI, only a few paise is charged to the merchant.