Topic of the Day – Unified Payment Interface (UPI)

Unified Payment Interface (UPI) is a frequently-seen topic in the news and is hence, important for the UPSC exam. It is a part of the economy and current affairs sections of the IAS syllabus.

The Unified Payment Interface is a payment system that allows money transfer between any two bank accounts through the medium of a smartphone. UPI allows a customer to pay directly from a bank account to different merchants, both online and offline, without the hassle of typing credit card details, IFSC code, or net banking/wallet passwords. The new interface is built on the same infrastructure as the Immediate Payment Service (IMPS), which is currently used by banks for real-time transfer of cash. Though the transaction limit for IMPS is Rs.2 lakh per transaction, for UPI the limit has been set at Rs.1 lakh.


  • India moved a step closer towards becoming a cashless economy with the launch of National Payments Corporation of India’s (NPCI) UPI.
  • UPI has come as a boon to the banks which were smarting under the onslaught of mobile wallets like Citrus Pay, Oxigen, PayTM, Mobikwik etc. It has helped them retrieve their lost ground.
  • The mobile wallets are kept out of service and the RBI has allowed only banks to become Payment Service Providers of UPI service.
  • The system will allow customers to instantaneously transfer funds across different banks with the use of a single identifier which will act as a virtual address and eliminate the need to exchange sensitive information such as bank account numbers during a financial transaction.
  • UPI is expected to make e-commerce transactions easier
  • It will facilitate micropayments and person-to-person payments.


  • Without end to end encryption messages can be read during transit. Therefore, it is necessary to have proper data security from the data service providers’ end with proper authentication system on hand
  • Cell phone if lost can create a huge problem for the customers as UPI can be misused.
  • It is easier to hack the systems where the database has all details at one place. Hence it becomes necessary to defend the database effectively defended from data theft or cracking by putting into place, effective cybersecurity measures.
  • There is a need for secure and robust encryption standards.

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