UPI, also known as United Payments Interface, is a payment system that allows instant fund transfers via mobile between multiple bank accounts. The first version of this platform was launched on April 2016 by the former governor of the Reserve Bank of India, Raghuram Rajan. The app has made the process of making payments much more efficient.

With the demonetisation in the economy, electronic payments have become more popular than ever before. The lack of currency circulation forced users to switch from cash to digital payments virtually overnight. This policy change had a lasting impact on the digital economy, making people more open to payment apps. With this positive change, the Government hopes to reach 30Bn digital payments this financial year and has taken several initiatives to achieve this. The UPI version 2.0 was launched in August 2018 and comes with more comprehensive features that make the app more user-friendly and accessible. UPI version 2.0 has introduced the following features that have helped make the mobile platform incredibly versatile:

Link the overdraft account

Along with their regular current and savings account, customers can also link their overdraft account to the UPI platform. This allows users to transfer money instantly, even if they have insufficient funds in the savings account. The purpose of this added feature is to allow merchants to accept credit which will help increase the number of merchant transactions on the platform.

View invoices

The UPI system allows customers to view invoices as an attachment before they make a payment. This allows users to verify their credentials and details of the purchase before they authorise the payment to the merchant. This makes the payment system more secure and gives the user more transparency on the payment being made.  

One-time mandate

The one-time mandate feature is similar to a scheduled payment. While this feature is available on internet banking apps, the advantage of UPI 2.0 is that it allows you to set a limit on the payment. The one-time feature allows you to schedule a payment for a date in the future. The amount of money set aside for the payment is blocked and cannot be used towards other transactions. However, the customer will still earn an interest on the amount since it is still in the bank account. The one-time mandate is useful for monthly bill payments, payments that need to be made in instalments or a future payment that you may forget to make.

QR authentication and signed intent

UPI 2.0 offers a safer way to make payments using the ‘scan and pay’ feature. This allows users to scan the QR codes of merchants before they authorise the payment. This helps smaller merchants as the users can now ensure they are UPI-verified before they make a purchase from them. With signed intent, users transactions can be authorised quicker as a passcode will no longer be required for the process. It also helps avoid QR tampering. The QR code security feature was developed by the Bharat Interface for Money app and has brought numerous benefits to the digitisation of banking.  

A higher transaction limit

UPI 2.0 has lowered restrictions on the maximum transactions a user can perform. In the prior version, the limit was set to INR 1 lakh but this has now increased to INR 2 lakhs per day.

Digital impact of UPI 2.0

UPI 2.0 combines numerous banking features to create a platform that allows secure merchant payments and fund transfers, making the mobile transfer function much simpler than before. UPI has introduced the ‘Peer to Peer’ function, that lets the user schedule and execute payments as per their convenience. When the app was first introduced, many people were sceptical of its success, but in the two years since, the app has been a game-changer in Indian society. The National Payments Corporation of India (NPCI) has reported that there has been a steady increase in the volume of users and usage of the app. By 2018, the app has had 14.4 crore transactions between 114 banks. There was a momentum in the number of transactions on UPI due to demonetisation in the market.

UPI 2.0 has taken a step towards innovation with their many new features that will help digitise banking and fintech companies. The one-time mandate will open up a whole new payment category in the e-commerce sector and combined with the overdraft, it creates a ‘buy-now-pay-later’ landscape. Along with ease of payments, the new version also offers better security with the QR code that prevents unauthorised apps from impersonating legitimate requests by cryptographically signing the QR code.

This update, along with other innovations such as low-cost mPOS machines and NFC payments, is certain to encourage even more users to adopt digital payment methods.

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