7 Days of using BHIM UPI: So Far, So Good

UPI or Unified Payments Interface  is the latest innovation in the Indian online banking industry and is supposed to be an improvement over the prevailing NEFT/NetBanking infrastructure which was being traditionally used since several years.




Being a user of NEFT/NetBanking myself, I was wary of jumping on UPI bandwagon when it was newly introduced in 2016, partly because the former had served me well since past few years and partly because the latter could still be a bit "buggy" and "cutting-edge" which doesn't bode well with financial transactions.

But now, after almost 3 years have passed since the introduction of UPI, its so many benefits can no longer be ignored, so I decided to give it a try:

• UPI protects your privacy - the sender just needs to know your payment address such as you@axis instead of your branch, a/c number, ifsc, etc.
• There are supposed to be fewer middle-men involved and the transactions are usually faster.
• Most popular apps like Google Pay, Paytm, BHIM UPI, etc. seem to be supporting it.
• Some recent reports suggest that some other countries like UAE and Philippines are going to support UPI too for Indians living there.

The second point needs to be thought upon in some detail. Fewer number of middle-men doesn't necessarily mean that no traditional gateway will be involved but that an app such as Paytm can play the dual role of a gateway and your shopping app. In traditional NetBanking, these are the parties generally inovlved:

1. Shopping app or website (Flipkart/Amazon/Swiggy/etc.)
2. Payment Gateway (BillDesk/CCAvenue/PayU/etc.)
3. Your Bank (SBI/ICICI/Axis/etc.) - this is where you are sent the OTP to enter.
4. After the transaction completes, bank redirects user to the gateway, then gateway back to shopping site.

I've always thought of this as a very clumsy and indirect process. Why do we need the help of a "gateway" to begin with, why can't the bank themselves agree upon a payment API standard? UPI addresses this problem though it doesn't eliminate it completely. However, its possible to make a payment without going through a gateway now even though some of the gateways have started supporting UPI payments themselves. But going forward, I can see that more and more shopping apps or website owners will try to avoid subscribing to a gateway since its possible to avoid them now!

Secondly, there is no OTP involved in UPI payments. Instead, you have a secret 6 digit MPIN which you setup at the time of registration through an app after verifying your mobile number (which should be the same you've given in the bank). Also, Google Pay and Paytm are just two apps, you can use one of the others such as Phonepe or BHIM UPI too. When making direct payment to an individual, the payment goes to their payment address, its immaterial which UPI app you are using and they are using.

The app also asks the last six digits of your debit card number during the verification process. Once you do this, your UPI profile is created on the servers of NPCI (National Payments Corporation of India), and you are given a unique payment address. This address can be chosen by you in some apps like Google Pay and BHIM app but in others like Paytm, it is fixed as your_number@paytm.

So, the process is entirely independent of the app itself. Now, anyone can pay you at your registered UPI payment address and the amount will be credited directly in your bank - zero middlemen involved! Now, you might say that this is what happens when you do a NEFT payment to someone's bank a/c, right? But here is the difference:

1. Unlike NEFT, you don't have to know the branch, a/c number, IFSC code, etc. of the payee, all you need is the UPI payment address, thus more privacy.
2. NEFT is closed on holidays and weekends and even on working days, it takes a few hours to process these payments. UPI, on the other hand, is instantaneous!
3. For NEFT, you have to use your own bank's website or app but UPI transactions can be made using any app such as Paytm or Google Pay.

It has been only 7 days since I've registered for UPI payments and started using it, and so far it has been a great experience. The payments are instantaneous and the process is much simpler than NetBanking:

1. User starts a transaction using an app or site (Flipkart/Amazon/etc.) and chooses UPI mode of payment.
2. User enters their UPI address in a textbox and taps the next button.
3. App verifies the address and opens a transaction page which provides a window of 10 minutes to complete the payment.
4. User then opens the payment app such as Paytm or Google Pay (but in practice, a notification automatically pops up on your smart-phone after the payment window starts) to make the payment.
5. User types the secret MPIN and makes the payment.

I find this to be much simpler because there are fewer number of gateways (middle-men) involved and no need to wait for the OTP. If you think that keeping the MPIN secret is a hassle, you may keep changing it at frequent intervals just like you change your debit card PIN.

Personally, I'm very happy with the UPI payment system, let me know about your experience through comments below!