Q. Which of the following is a most likely consequence of implementing the Unified Payments Interface (UPI)?

  • Mobile wallets will not be necessary for online payments.
  • Digital currency will totally replace the physical currency in about two decades.
  • FDI inflows will drastically increase.
  • Direct transfer of subsidies to poor people will become very effective.

Answer: (a) Mobile wallets will not be necessary for online payments.

Unified Payments Interface (UPI):
  • The UPI is a digital and real-time payment system developed by the National Payments Corporation of India (NPCI) and regulated by the Reserve Bank of India (RBI).
  • It was launched on April 11, 2016.
  • It is designed to enable peer-to-peer inter-bank transfers through a single two-click factor authentication process. 
  • Features:
    • Unlike traditional methods, UPI simplifies transfers using the recipient’s UPI ID, be it a mobile number, QR code, or Virtual Payment Address, eliminating account numbers.
    • It eliminates the need to enter bank detailsor other sensitive information each time a customer initiates a transaction.
      • Mobile wallets will not be necessary for online payments. UPI allows you to pay directly from your bank account to different merchants without the hassle of typing your card details, or net banking/wallet password.
    • A consistent UPI transaction PIN across apps enhances cross-operability, enabling 24/7 transactions.
    • UPI operates as a digital public infrastructure, allowing seamless interactions for all players, including merchants and customers, without transaction costs.
    • UPI uses technologies like the Immediate Payment Service (IMPS) and the Aadhaar-Enabled Payment System (AEPS) to ensure that payments between accounts go smoothly. 
    • It facilitates push (pay) and pull (receive) transactions and even works for over-the-counter or barcode payments, as well as for multiple recurring payments such as utility bills, school fees, and other subscriptions.
    • It also works with “Peer-to-Peer” requests, which can be scheduled and paid for based on need and convenience.
  • The top UPI apps today include PhonePe, Paytm, Google Pay, Amazon Pay and BHIM, the latter being the Government offering.
National Payments Corporation of India
  • NPCI, an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.
  • It is a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.