Behind the Technology of UPI: How It Handles ₹18.41 Trillion Transactions!
India’s UPI has revolutionized digital payments an suitable, public infrastructure enabling private innovation.
It’s simple, fast, and widely adopted.
What is UPI?
Unified Payments Interface (UPI) is a digital payment system that allows users to send and receive money using a mobile app. It was developed by the National Payments Corporation of India (NPCI).
How UPI Works?
UPI links virtual payment addresses (VPAs) like akash@hdfc directly to bank accounts, eliminating the need for IFSC codes. But what happens behind the scenes when you send money?
Let’s break it down:
- Akash(Sender) uses PhonePe to send ₹100 to Anant (Receiver).
- He enters Anant’s UPI ID.
- PhonePe encrypts the request and forwards it to its acquiring bank (SBI).
- SBI sends it to NPCI, which validates Akash’s account and fetches Anant’s bank details.
- NPCI routes the request to Anant’s bank (ICICI) for validation.
- ICICI confirms the details, and NPCI authorizes Akash’s bank (HDFC) to debit ₹100.
- HDFC checks balances, debits the amount, and confirms back to NPCI.
- NPCI instructs ICICI to credit ₹100 to Anant’s account.
- ICICI completes the credit and notifies NPCI.
NPCI ensures settlements between banks via RBI, completing the transaction.
All of this happens in seconds!
Why UPI Works So Well
- Banks: Hold funds & process transactions
- Payment Apps: Link bank accounts & facilitate transactions
- NPCI: The trusted switch ensuring seamless routing & security
This blend of innovation and security has made UPI the backbone of India’s digital economy.
What’s your view on UPI’s future?