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UPI Booster

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December 13, 2021

Why in news?

The RBI has announced a proposal to popularise UPI payments on feature phones which would be the third iteration of the feature phone payments push in the country.

What is UPI?

  • A Unified Payment Interface (UPI) is a smartphone application thaw was launched in 2016 t0 allows users to transfer money between bank accounts.
  • It is a single-window mobile payment system that caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
  • It eliminates the need to enter bank details or other sensitive information each time a customer initiates a transaction making it a safe way to bank.
  • The interface is developed by the National Payments Corporation of India (NPCI) and regulated by the Reserve Bank of India (RBI).
  • Unique features of UPI
    • Immediate money transfer through mobile device round the clock 24*7 and 365 days
    • Single mobile application for accessing different bank accounts
    • Single Click 2 Factor Authentication
    • Virtual address of the customer for Pull (Receive money) & Push (Send money)
    • Utility Bill Payments, Over the Counter Payments, QR Code (Scan and Pay) based payments
    • Raising Complaint from Mobile App directly

What is UPI 2.0?

  • UPI 2.0 was launched in 2018 to shape UPI into an end-to-end digital transacting platform.
  • Key features of UPI 2.0
    • Linking of overdraft account- In addition to current and savings accounts, customers can link their overdraft account to UPI.
    • One-time mandate- UPI mandate could be used in a scenario where money is to be transferred later by providing commitment at present.
    • Invoice in the inbox- This feature will help customers to view and verify the credentials and check whether it has come from the right merchant or not.
    • Signed intent and QR- This feature is designed for customers to check the authenticity of merchants while scanning QR or quick response code.


What are the benefits of UPI?

  • For Banks
    • Single click two factor authentication
    • Universal application for transaction
    • Leveraging existing infrastructure
    • Safer, secured and innovative
    • Payment basis single/ unique identifier
    • Enable seamless merchant transactions
  • For customers
    • Round the clock availability
    • Single application for accessing different bank accounts
    • Use of Virtual ID is more secure, no credential sharing
    • Single click authentication
    • Raise complaint from mobile app directly
  • For Merchants
    • Seamless fund collection from customers - single identifiers
    • No risk of storing customer’s virtual address like in cards
    • Tap customers not having credit/debit cards
    • Suitable for e-com & m-com transaction
    • Resolves the COD collection problem
    • Single click 2FA facility to the customer - seamless pull
    • In-App Payments (IAP)

What is the need for RBI to popularise UPI payments on feature phones?

  • The monthly transactions value by UPI increased from Rs 1.8 lakh crore in November 2019 to  Rs 7.6-lakh crore by November 2021.
  • While credit and debit card payments flat-lined at Rs 13-lakh crore between FY19 and FY21, the use of UPI payments have jumped from Rs 8.7-lakh crore to Rs 41-lakh crore.
  • But usage of cash is still high and UPI commands less than a 10 % share of digital retail payments with considerable scope for growth.
  • To expand penetration, RBI plans to deploy innovative solutions allowing feature phone users to onboard UPI.
  • Since, about 37 % of India’s mobile phone users are still using basic phones and internet connectivity in the hinterland, this is a good idea.

What is the past experience of feature phone payments push?

  • USSD- In 2012, the NPCI had launched a USSD (Unstructured Supplementary Services Data)-based mobile banking service called *99#
  • Initially, the facility was only available to MTNL and BSNL users but later expanded to all telecom service providers and linked to Pradhan Mantri Jan Dhan Yojana in 2014.
  • USSD 2.0- The USSD 2.0 was launched alongside BHIM in 2016, incorporating all the UPI options, but it hasn’t quite taken off.
  • This is because of the low penetration of UPI-linked bank accounts then and the need to remember the beneficiary’s bank details.
  • Addressing the flaws- RBI needs to address UPI’s high transaction failure rates which make users hesitant to rely on it for high-value payments.
  • Such failures can be attributed to the large volume of transactions below Rs 200 which clogs the banks’ system capacities.
  • Such transactions can be routed through an on-device wallet in the UPI app, which works like a prepaid instrument, to avoid multiple debits and credits to the underlying account.
  • Holding participant banks more accountable for slow reversal of failed transactions is needed.
  • RBI guidelines set a 1 day limit for a beneficiary bank to reverse a failed account-to-account UPI transaction and a 5 day limit for merchant payments, with a penalty of Rs 100 per day for failure to comply, but these rules are often breached.
  • The RBI’s plan to issue a discussion paper specifying transaction charges across digital modes must be in such a way that it does not disturb the zero Merchant Discount Rate policy which today renders UPI free of cost to users.
  • RBI can use this opppurtunity to redouble efforts to wean the economy away from cash to digital modes.

The merchant discount rate is the rate charged to a merchant for accepting payment from their customers through digital means.



  1. https://www.thehindubusinessline.com/opinion/editorial/upi-booster/article37939817.ece
  2. https://www.npci.org.in/what-we-do/upi/product-overview
  3. https://www.livemint.com/Money/Cog3dAvOZka0OsNg8M9S8O/UPI-20-launched-Here-are-its-key-features.html
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