With the advent of modern technology, the digital payment system is undergoing tremendous changes as more and more options are innovated and thrown at the disposal of consumers.
Today, the system offers instant person to person payment options, especially in the retail segment. The consumers don’t have to remain hostage to the official timings of the service provider as the varied payment systems operate round the clock without any break.
The seamless electronic payment system encouraged the consumers to bank upon digital mode to conduct financial transactions.
Actually the system of payments and settlements has its origin in the barter system. Over a periodic time, we witnessed money replacing the barter system where currency notes and coins came into the system to settle transactions of goods and services.
The banking system added flavor to the system as transactions began through bank accounts to settle payments against godsend services. It’s here that the cheque system emerged on the scene and the cheque is known as the primary instrument for payment transactions.
Historically speaking, the Reserve Bank of India (RBI) documents the use of cheque for payment transactions as the beginning of the tale of payment systems.
Over a period of time, the technological revolution and the onset of the Internet era changed the complexion of the payment and settlement system . Currently, we are in a digital era where consumers make purchases and conduct financial transactions at their fingertips that too at lightning speed.
Precisely, this is an era of digital payment system where payment apps like Phonepe, Google Pay, Paytm, etc have become permanent companions of the consumers. Technically speaking, it’s the Internet which acts as an engine of digital transactions and the consumers necessarily need such connectivity to explore the ease of digital payment system.
It was a shot in the arm for the digital payment and settlement system when the Reserve Bank of India (RBI) on March 9 opened up a home grown payment network, unified payments interface (UPI), for feature phones. About 400 million users of such phones will be now able to conduct digital transactions on their featured phones without the Internet.
Notably, feature phones are basic phones, which typically provide voice calling and text messaging functionalities. Data reveals that India has a mobile phone consumer base of about 118 crore, of which about 74 crore have smartphones. The data suggests that there is a significant number of feature phone users in the country.
Though the funds transfer facility through UPI mode was already available on feature phones through a complicated USSD or Unstructured Supplementary Service Data mode, it was cumbersome for the users as they had to undergo multiple stages to initiate transactions. During the course, the users had to bear charges for messages. This cumbersome process discouraged the feature phone users to bank upon the UPI for conducting digital transactions.
Now with the launch of new UPI facility, named as UPI123Pay, the feature phone users wont face any discrimination in conducting electronic financial transactions, that too without Internet. In a way, the new payments system will give a huge push to digital financial inclusion in the country, which will ultimately add speed to economic growth. Remarkably, as stated by the RBI Governor on the launch of the new UPI facility, UPI has played a major role in the adoption of digital payments in India, recording about 4.53 billion transactions worth `8.26 trillion in February 2022, almost double compared to a year ago. In fact, in FY21, the total value of UPI transactions was `41 trillion.
What exactly is this unified payments interface (UPI) system?
Unified Payment Interface, rolled out in 2016, is a single-interface payment system, developed by the National Payment Corporation of India (NPCI) and is regulated by the RBI. It is a mobile based, 365x24x7 ‘fast payment’ system wherein users can send and receive money instantly and the user is not required to share account or bank details to the remitter.
It supports person to person (P2P) and person to merchant (P2M) payments. Although its use was mostly limited to smartphone users and merchant locations, the launch of UPI123pay version will now allow the feature phone users to use the facility without having an Internet connection. To be precise, UPI facilitates immediate money transfer through pull and push payments, merchant payments, utility bill payments, QR code (scan and pay) based payments, etc.
Non-financial transactions such as mobile banking registration, balance enquiry, etc., can also be carried out using UPI. It powers multiple bank accounts into a single mobile application of any participating bank / non-bank Third Party Application Provider (TPAP). Funds can be transferred using Virtual Payment Address (VPA) or account number with bank code (IFSC).
Notably, its framework comprises NPCI as network and settlement service provider, banks as Payment System Providers (PSPs), and as issuer banks and beneficiary banks; apart from TPAPs such as Google Pay, Truecaller, WhatsApp, etc. Non-bank PPI issuers have also been allowed to provide this facility in an interoperable manner to their PPI wallet holders.
What is the procedure of making instant payments through UPI123 without smartphones or internet connections?
It is important to create a UPI ID to use UPI123 service on your phone. To create a UPI ID on the phone, dial *99#, choose your bank name, and enter the last six digits of your debit card, and your card expiry number. After this is done, you will be asked to set up your UPI pin. Now, your UPI ID will be activated.
The application includes four options:
App-based functionality: An app would be installed on the feature phone through which several UPI functions, available on smartphones, will also be available on feature phones.
Missed call: This will allow feature phone users to access their bank account and perform routine transactions such as receiving, transferring funds, regular purchases, bill payments, etc., by giving a missed call on the number displayed at the merchant outlet. The customer will receive an incoming call to authenticate the transaction by entering UPI PIN.
Interactive Voice Response (IVR): UPI payment through pre-defined IVR numbers would require users to initiate a secured call from their feature phones to a predetermined number and complete UPI on-boarding formalities to be able to start making financial transactions without internet connection.
Proximity sound-based payments: This uses sound waves to enable contactless, offline, and proximity data communication on any device.
How to use UPI123?
-Dial the IVR number 08045163666 on your phone.
-On the IVR menu, select your preferred language.
-Now, choose the bank linked with UPI
-Press ‘1’ to confirm the details.
-Press ‘1’ to send money by using your mobile number.
-Enter the mobile number of the recipient.
-Confirm the details.
-Now, enter the amount that you want to transfer.
-Enter your UPI PIN and authorise the money transfer.
You can even pay utility bills, recharge the FAST Tags, pay mobile bills and also check account balances. You can also link bank accounts, set or change UPI PINs.
What is UPI-PIN?
UPI-PIN (UPI Personal Identification Number) is a 4-6 digit pass code you create/set during first time registration with this App. You have to enter this UPI-PIN to authorize all bank transactions. Do not share your UPI-PIN with anyone and note that your bank’s customer support will never ask for it.
What is the maximum limit on transfer of money?
As UPI continues to be the preferred mode of payment for low-value transactions, the limit for UPI transactions stands at Rs 2 lakh per day, up from Rs 1 lakh earlier. It’s interesting to note that 78 percent of person to merchant (P2M), and 59 percent of person to person (P2P) transactions are up to Rs 500. Further in terms of volumes, transactions between Rs 501 and Rs 2,000 make up 15 percent of P2M and 20 percent of P2P volumes. Transactions above Rs 2,000 are just 7 percent of P2M and 21 percent of P2P volumes.
Inputs from RBI & NPCI)
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The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK