<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/marketing-cms/m2p-blog/2025/11/upi_blog_v1.webp" alt="UPI Payment, UPI 123Pay" title="" id="e89k2oxhf" width="100%" height="610">India's digital payments landscape has been completely transformed by the <a class="link" href="https://m2pfintech.com/upi/" target="">Unified Payments Interface (UPI)</a>. It's a game-changer, making instant, inter-bank transactions as easy as sending a text. In October 2025 alone, <a class="link" href="https://staging.m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/" target="">UPI</a> hits a record 20.7 billion transactions worth ₹27.28 lakh crore, underscoring its dominance and positioning India as a global leader in real-time payments.Despite the tremendous growth in digital payments, a large portion of India’s population still depend on feature phones.&nbsp; In semi-urban and rural areas, where network connectivity is often a challenge and smartphones are a luxury, these simple, button-based devices are a lifeline. The inability of feature phone users to access UPI meant a vast population was left behind in the digital payment revolution.Recognizing this, the National Payments Corporation of India (NPCI) launched UPI 123Pay in 2022. This innovative solution is designed specifically for feature phone users, to access UPI services without an internet connection. It's a simple, yet powerful solution that brings the convenience and security of UPI to an underserved people proving that financial inclusion isn't just about technology, but about accessibility.This blog dives into how UPI 123Pay is transforming payment accessibility, why feature phones still matter, and what it means for banks, fintech’s, and India’s financial ecosystem.Let’s dive into its basics.<h2 class="heading-node" id="qe7eg2y62">What is UPI 123PAY?</h2>UPI 123Pay is a payment solution designed specifically for feature phone users, enabling them to make digital transactions using their UPI ID without needing internet access or a smartphone. Launched in 2022 by NPCI in partnership with the Reserve Bank of India (RBI), this initiative aims to close the digital payment gap and extend the convenience of UPI to nearly 400 million users in remote areas across India.To get started with UPI 123Pay, users must first link their bank account to their feature phone and create a secure UPI PIN. Once set up, they can easily perform a variety of transactions through user-friendly payment options tailored for those without smartphones, ensuring wider financial inclusion and access to digital payments for everyone.<h2 class="heading-node" id="hajhm49h6">How to set-up and make payments with UPI 123Pay?</h2><h3 class="heading-node" id="dtcypevyq">Setting Up Your UPI ID</h3>Setting up a UPI ID on a feature phone is straightforward and enables users without smartphones to access digital payments easily. Follow these simple steps:<ol class="list-node" id="pbdnyf9jd" type="1"><li>Link Your Bank Account:&nbsp;Dial *99# from your feature phone to access the UPI 123Pay menu. Choose your preferred language and select your bank from the list provided.</li><li>Verify Your Account:&nbsp;Confirm your bank account by entering details such as the last six digits of your debit card and its expiry date.</li><li>Set Your UPI PIN:&nbsp;Create a unique 4 or 6-digit UPI PIN that will authenticate your transactions. You will be prompted to enter this PIN during every payment to ensure security.</li><li>Get Your UPI ID:&nbsp;Once your account is linked and PIN is set, a UPI ID (also called Virtual Payment Address or VPA) is automatically created for you. This ID can be used for sending and receiving money.</li></ol><h3 class="heading-node" id="n5jabcvz4">Making Payments with UPI 123Pay</h3>UPI 123Pay offers feature phone users four simple and convenient ways to perform digital transactions without needing internet or a smartphone. Here’s how it works:<ul class="list-node" id="k7urh6h51"><li>Interactive Voice Response (IVR):&nbsp;Users call a pre-set IVR number where they can follow voice prompts in multiple languages to send money, recharge, pay bills, or shop. This secure phone call method guides users step-by-step to complete transactions using their UPI PIN.</li><li>Missed Call Payments:&nbsp;At merchant outlets, customers receive a token with their mobile number and bill amount. They give a missed call to a designated number, and soon get a callback prompting them to enter their UPI PIN to authenticate and complete the payment.</li><li>App on Feature Phone:&nbsp;Some feature phones come preloaded with a simplified UPI app that enables users to make payments similar to smartphone apps.</li><li>Sound-Based Payments:&nbsp;Users call an IVR, select “Pay to Merchant,” tap their phone on a merchant’s sound-enabled device, and complete the payment by entering the amount and UPI PIN. This contactless method works offline and is convenient for quick transactions.</li></ul><h2 class="heading-node" id="9quuc5gc8">Benefits of UPI 123Pay</h2>UPI 123PAY solution brings several impactful benefits:<ul class="list-node" id="9jbsuftql"><li>Wider Reach:&nbsp;Empowers millions to make digital transactions easily, breaking the barrier of needing internet or advanced devices.</li><li>Flexible Payment Options:&nbsp;Users enjoy multiple ways to pay whether via voice calls, missed calls, or simple keypad commands, choosing what’s easiest for them.</li><li>Robust Security:&nbsp;With UPI’s trusted two-factor authentication, every transaction is secured to protect users from fraud.</li><li>Inclusive Language Support:&nbsp;Offering services in many regional languages, it makes digital payments accessible and comfortable for India’s diverse communities.</li></ul><h2 class="heading-node" id="txz0po9ol">UPI 123Pay vs. Regular UPI: Key Differences</h2>While both platforms run on the same underlying UPI network, UPI 123Pay is specifically designed for accessibility, leading to some key differences:<ul class="list-node" id="wbxyuzx0e"><li>Connectivity: The most significant difference is that UPI 123Pay works without data connectivity, using voice, text, and sound-based technology instead of an app interface.</li><li>Bank Linking: On UPI 123Pay, users can typically link only one bank account at a time, whereas the regular UPI app allows multiple linked accounts.</li><li>Transaction Limits: While regular UPI allows a daily limit of ₹1 lakh (with higher limits for specific categories), each UPI 123Pay transaction is capped at ₹10,000, with a daily maximum of ₹1 lakh.</li><li>Feature Availability: Due to device limitations, some features like scan-and-pay QR codes are not available on UPI 123Pay.</li><li>User interface:&nbsp;UPI 123PAY uses voice, text, and sound-based technology for navigation and authentication in place of touchscreen app interfaces.</li></ul>Despite these differences, the launch of UPI 123Pay marks a new era of financial inclusion. The convenience, security, and simplicity of UPI are now within reach for millions of feature phone users, fostering a more inclusive and robust digital economy. For banks, this is a massive opportunity to serve a new, untapped market and deepen customer relationships. While the potential is huge, M2P also supports this functionality with our UPI stack.Our robust and comprehensive UPI stack is designed to integrate and launch this functionality for their customers seamlessly. Instead of a lengthy and costly in-house building, banks can leverage our technology to fast-track their go-to-market strategy.<a class="link" href="https://m2pfintech.com/contact-us/?activeKey=1&amp;utm_source=UPI%20123Pay&amp;utm_medium=Blog&amp;utm_campaign=CTA" target="">Connect with us</a> to know more about our UPI solutions.Follow us on&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noreferrer noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://twitter.com/m2pfintech" target="_blank" rel="noreferrer noopener">Twitter</a>&nbsp;for insightful fintech bytes curated for curious minds like you.Source:&nbsp;<ol class="list-node" id="ihm6l3m9v"><li>https://bfsi.economictimes.indiatimes.com/articles/upi-transactions-surge-to-record-207-billion-in-october-2025/125013308</li><li>https://www.npci.org.in/what-we-do/upi-123pay/product-overview</li><li>https://www.npci.org.in/product/upi-123pay</li><li>https://www.wintwealth.com/blog/what-is-upi-123pay-how-to-use-it-and-how-is-it-different-from-the-current-upi-interface/</li><li>https://paytm.com/blog/payments/upi/upi-123pay-uses-benefits-methods/</li></ol>

UPI 123Pay: Unlocking Digital Payments for Feature Phones

Modern Microfinance Lending: Empowering Kenya’s MFIs to Lead

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/marketing-cms/m2p-blog/2025/06/DIGIPIN%20blog-02.webp" alt="What is DIGIPIN and impact on financial institutions" title="" id="2twdqki1z" width="100%" height="288">India’s digital lending revolution has transformed how millions access credit, but one persistent challenge remains: address verification. In FY24, the BFSI industry reported a 6.4% discrepancy rate in address verification, not only leading to delays in customer onboarding and complicating credit risk assessment but also disrupting last-mile service delivery, impacting both operational efficiency and customer satisfaction.&nbsp;The newly launched DIGIPIN system is set to break these barriers.A joint initiative by India Post, IIT Hyderabad, and ISRO’s National Remote Sensing Centre, DIGIPIN is a GPS-based digital address system designed to eliminate ambiguity in physical addresses by providing precise, standardized location identifiers. And for financial institutions, especially lenders, this innovation could not have come at a better time.Let’s explore what DIGIPIN means for the future of credit, compliance, and financial inclusion.&nbsp;<h2 class="heading-node" id="1f5zun0tx" style="text-align: left">What is DIGIPIN?</h2>DIGIPIN is India’s new digital address system that divides the entire country into uniform 4x4 meter grids, assigning each grid a unique 10-character alphanumeric code based on its latitude and longitude coordinates. &nbsp;This system is open-source, privacy-centric (as it encodes only location, not personal data), and is accessible nationwide, including urban, rural, remote, and maritime areas. &nbsp;<h2 class="heading-node" id="ljdgov5v7" style="text-align: left">Why Lenders Can’t Ignore the Address Problem Anymore?</h2>Unlike traditional PIN codes that cover large areas, DIGIPIN pinpoints the exact location of a property or place, enabling address validation/verification even in unstructured or undocumented areas.&nbsp;DIGIPIN aims to improve the accuracy of deliveries, emergency response, and service provision by eliminating address ambiguity. Users can generate their DIGIPIN by locating their property on the official government portal, making it easy to share precise location information for logistics, e-commerce, and public services.&nbsp;<h2 class="heading-node" id="5ofetxyrz" style="text-align: left">The Hidden Challenge: Why Address Accuracy is Lending’s Next Frontier&nbsp;&nbsp;</h2>India’s lending landscape has been transformed by digital innovations. Advances like eKYC, alternate data sources, and paperless onboarding have streamlined much of the process. Yet, one stubborn obstacle remains: precise location accuracy.&nbsp;For millions of borrowers, particularly those residing in informal settlements, shared accommodations, or newly developed and rapidly growing neighborhoods, having a formal address is elusive. Instead, directions like ‘behind the temple,’ ‘near the water tank,’ or ‘last house in the third lane’ are common. This ambiguity poses a hidden but significant risk for financial institutions including&nbsp;<ol class="list-node" id="vnysrir4h"><li>Lengthy turnaround times (TATs) during Loan Origination.&nbsp;</li></ol><ol class="list-node" id="hoe6ye65x" start="2"><li>High operational cost associated with field verification.&nbsp;&nbsp;</li></ol><ol class="list-node" id="wva2z0eiv" start="3"><li>Increase in risk of identity and address-related fraud.&nbsp;&nbsp;</li></ol><ol class="list-node" id="n1ux0sd9u" start="4"><li>Inefficient and resource-intensive debt collection processes.</li></ol><h2 class="heading-node" id="18on54dmj" style="text-align: left">How DIGIPIN Transforms Lending Operations?</h2>DIGIPIN is more than a technological upgrade, it’s a catalyst for reshaping how financial institutions reach, verify, and serve customers across India’s diverse landscape. &nbsp;Here's how:&nbsp;<ol class="list-node" id="2egcnw8bz"><li>Inclusion Through Address Identity&nbsp;</li></ol>DIGIPIN assigns precise, mappable digital identities to homes in informal settlements, unplanned neighborhoods, and underserved regions.&nbsp;This breakthrough enables lenders to<ul class="list-node" id="odrbrjqdx"><li>Extend micro-loans, gold loans, and embedded credit products to unserved populations.</li><li>Confidently underwrite borrowers without formal addresses.</li><li>Expand their credit footprint into high-potential but previously unaddressable markets.</li></ul>By bridging the addressability gap, DIGIPIN acts as a powerful enabler of true financial inclusion.<ol class="list-node" id="363oaw9qm" start="2"><li>Smarter Customer Onboarding&nbsp;</li></ol>With DIGIPIN integrated as a location-verifiable input in digital KYC processes, lenders can instantly validate a customer’s exact residence, even in areas with ambiguous or non-standard addresses.&nbsp;&nbsp;This will help lenders to&nbsp;<ul class="list-node" id="h8j24ref8"><li>Accelerate onboarding and reduce turnaround times.&nbsp;</li></ul><ul class="list-node" id="wz1diyczg"><li>Lower rejection rates due to unverifiable addresses.&nbsp;</li></ul><ul class="list-node" id="0y559umwa"><li>Minimize customer drop-offs, especially in rural and semi-urban segments.&nbsp;</li></ul>The result is a frictionless, scalable onboarding experience that brings more borrowers into the fold, especially from rural and semi-urban markets.<ol class="list-node" id="yjronbo3x" start="3"><li>Geo-Intelligent Risk Assessment&nbsp;</li></ol>By attaching unique DIGIPINs to borrower profiles, financial institutions unlock powerful geospatial analytics.&nbsp;Lenders can now&nbsp;<ul class="list-node" id="o5kpv519h"><li>Score risk based on borrower clusters and local conditions.&nbsp;</li></ul><ul class="list-node" id="v0zcun5bz"><li>Segment portfolios more accurately across rural, peri-urban, and urban landscapes.&nbsp;</li></ul><ul class="list-node" id="oou9lq8o9"><li>Target loan products to specific geographic needs or opportunities.&nbsp;</li></ul>This granular, location-based intelligence leads to smarter underwriting, better risk management, and more tailored credit offerings.<ol class="list-node" id="ns668kd6h" start="4"><li>Smarter Collections and Recovery at Scale&nbsp;</li></ol>Among its many advantages, DIGIPIN proves especially transformative for collections teams. By enabling map-accurate borrower navigation, it removes the reliance on vague, landmark-based directions, reducing wasted trips and time-to-contact.&nbsp;This level of precision<ul class="list-node" id="od2hed4f3"><li>Enhances route planning for field visits.&nbsp;</li></ul><ul class="list-node" id="xqtohpr8i"><li>Improves skip tracing and borrower reachability.&nbsp;</li></ul><ul class="list-node" id="f3ljrlpt4"><li>Minimizes repeat attempts and fuel costs.&nbsp;</li></ul><ul class="list-node" id="orptyreej"><li>Boosts first-time recovery success rates.&nbsp;</li></ul>&nbsp;For lenders, this means lower field ops overhead and higher recovery efficiency. For agents, it eliminates guesswork and improves safety.<h2 class="heading-node" id="jwtu5cqth" style="text-align: left">Looking Ahead: A New Layer of Intelligence in Financial Services&nbsp;</h2>India’s financial infrastructure has undergone rapid transformation, from Aadhaar-based eKYC to account aggregators, from UPI-led payments to ONDC-based commerce. DIGIPIN completes this digital evolution by providing every location with a standardized, digital identity.&nbsp;As the industry embraces this unified location layer, it opens the door to innovative business models:&nbsp;<ul class="list-node" id="e1l2s0o65"><li>location-based loan offers,&nbsp;&nbsp;</li></ul><ul class="list-node" id="mnbpf8abv"><li>decentralized and more efficient collections,&nbsp;&nbsp;</li></ul><ul class="list-node" id="y7ecvoazr"><li>hyper-local lending, and beyond.&nbsp;</li></ul>With embedded finance, rural digitization, and AI-driven credit models accelerating, access to verifiable, precise, and interoperable location data will be the differentiator that empowers agile lenders to lead the market. DIGIPIN is not just closing the addressability gap; it’s laying the foundation for the next generation of intelligent, inclusive, and responsive financial services.&nbsp;Want to explore how DIGIPIN can enhance your lending stack?&nbsp;<a class="link" href="https://m2pfintech.com/contact-us/?activeKey=1" target="_blank">Talk to our product experts </a>and explore how DIGIPIN can power smarter onboarding, risk control, and credit delivery.&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noreferrer noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://twitter.com/m2pfintech" target="_blank" rel="noreferrer noopener">Twitter</a>&nbsp;for insightful fintech bytes curated for curious minds like you.

How DIGIPIN can be a Game Changer for Financial Institutions?

How Technology is Revolutionizing Microfinance Lending?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2025/01/Main-Banner-1-100.webp" alt="What is UPI circle?" title="" width="100%" height="253">Back in the day, grandparents would give us pocket money for our expenses, and our parents would carefully monitor every purchase, ensuring we spent wisely. Fast forward to today, imagine a system that empowers parents to oversee their children’s purchases with pre-set spending limits.That’s UPI Circle for you.Now, let’s consider another scenario. You’re an entrepreneur looking to grant your staff the flexibility to manage administrative expenses while maintaining oversight of the accounts.With the <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> Circle feature, you can do just that.The possibilities are endless—these are just a couple of ways UPI Circle can transform how you manage and monitor expenses effortlessly.Let’s explore the transformative potential of UPI Circle, from its functionality and benefits to its impact on both banks and users. Before that, what’s <a class="link" href="https://www.linkedin.com/posts/m2pfintech_upi-circle-activity-7288514156675117056-TB6t?utm_source=share&amp;utm_medium=member_desktop">UPI circle</a> in its true essence.<h2 class="heading-node" id="uwaqfzxpv" style="text-align: left">What is UPI Circle?</h2>UPI Circle, introduced by NPCI, enhances digital payment accessibility by allowing primary users to add family members or friends as secondary users. The secondary users can make transactions using the primary user's bank account, within predefined limits. This feature is designed to offer UPI access to individuals who may not have their own bank accounts or are reluctant to use digital payments, making it easier for them to engage in the digital economy.<h2 class="heading-node" id="r5744lsd7" style="text-align: left">Why the UPI Circle Initiative?</h2>UPI Circle streamlines access to digital payments and simplifies the adoption of formal banking systems for millions of unbanked individuals. This innovation not only promotes financial literacy but also opens doors to new economic opportunities for underserved communities. UPI Circle’s impact goes far beyond convenience—it’s a catalyst for accelerating India’s financial inclusion<h2 class="heading-node" id="916qd0uz5" style="text-align: left">How does UPI Circle Work?</h2>The UPI Circle enables a primary UPI user to delegate transaction authority to a trusted secondary user. This delegation can be customized as partial or full, based on the primary user’s preferences and requirements. It is especially beneficial for the elderly, differently abled, or those who need support in managing their finances.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2025/01/Sub-Banner-1-100.webp" alt="M2P Fintech" title="" width="100%" height="317"><h3 class="heading-node" id="vuzvmp180" style="text-align: left">Full Delegation</h3>This mode allows the primary user to assign a monthly transaction limit of up to ₹15,000 to the secondary user. Within this limit, the secondary user can independently make payments, with a maximum cap of ₹5,000 per transaction. It enables the secondary user to transact freely within the set boundaries.<h3 class="heading-node" id="3wwk554wb" style="text-align: left">Partial Delegation</h3>In this mode, the secondary user must seek the primary user’s approval for every payment request. Unlike full delegation, the secondary user cannot complete transactions independently, providing the primary user with tighter control over each payment.<h2 class="heading-node" id="0hdqqtgiz" style="text-align: left">Benefits of UPI Circle</h2><ul class="list-node" id="96mv2y6y2"><li>Enhanced Control: Primary users can set spending limits and approve transactions, ensuring better control and oversight.</li><li>Transaction Transparency: Allows primary users to have complete visibility into transactions made by secondary users, ensuring full transparency.</li><li>Customizable Permissions: Allows to set specific rules and parameters for secondary users, making it perfect for use cases such as parental oversight on children's spending or managing business expenses.</li><li>Financial Inclusion: Makes digital payments accessible to underserved populations, helping integrate unbanked individuals into the financial system.</li></ul><h2 class="heading-node" id="q1lnfyeks" style="text-align: left">Use Cases of UPI Circle</h2><ul class="list-node" id="don6z1ye5"><li>For Senior Citizens: Simplifies digital payments by letting trusted family members handle transactions, easing the burden of navigating complex systems.</li><li>For Students: Offers quick, controlled access to funds, providing peace of mind for both students and parents managing expenses.</li><li>For Families: Facilitates collaborative management of household expenses, ensuring smooth operations and promoting financial literacy among younger members.</li></ul>Just as UPI Circle simplifies the payment experience for individuals and families, businesses also require seamless, scalable, and secure solutions for their UPI programs.This is where <a class="link" href="https://m2pfintech.com/upi/">M2P’s UPI stack</a> comes in.M2P’s UPI StackOur cloud-native full-stack UPI platform is a fully regulatory compliant solution that empowers financial institutions of all sizes to seamlessly launch and scale UPI programs within a unified stack. We enable businesses to accelerate go-to-market efforts, reduce operational costs, and improve transaction security with our customizable stack. Our solution is built for unmatched efficiency with<ul class="list-node" id="htsx8y73n"><li>100% light weight <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a> coverage</li><li>Low-code integration</li><li>Limitless scalability</li><li>Economical Total Cost of Ownership (TCO)</li><li>Modular architecture</li></ul>Are you ready to implement UPI circle?<a class="link" href="https://m2pfintech.com/contact-us/?activeKey=1">Get in touch</a> with us today.<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noreferrer noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://twitter.com/m2pfintech" target="_blank" rel="noreferrer noopener">Twitter</a>&nbsp;for insightful fintech bytes curated for curious minds like you.

UPI Circle: Revolutionizing Financial Accessibility for All

Offline Digital Payments: Boosting Financial Inclusion in India

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/08/Credit-Underwriting-Blog_1-05-1.webp" alt="M2P Fintech" title="" width="100%" height="529">India's digital lending market recorded a 132% CAGR between 2017 and 2022 and is expected to reach 350 billion dollars in value by 2023. The upswing in the number of consumers using digital avenues for banking proliferated digital loans by 40 to 60%. In today's lending landscape, credit underwriting is fundamental and pivotal in gauging the credibility of the borrower. Assessing credit risk remains the&nbsp;top priority for lenders as it determines the viability and profitability of the business. It helps lenders assess if the borrower can pay back a loan. Although the way lenders evaluate their applicants may vary across products, the basic framework is the same. In this article, let's focus on credit underwriting and how alternate data sources can change the dynamics of the process.&nbsp;<h2 class="heading-node" id="3czmturic" style="text-align: justify">What is Credit Underwriting?</h2>Credit underwriting is a systematic risk assessment method performed to appraise the creditworthiness of a loan or insurance policy applicant. It is a crucial function of banks, NBFCs, and other Financial Institutions (FIs) in the lending business as it helps measure the applicant or borrower's risk profile. Traditionally, Financial Institutions utilize credit reports generated by manually examining customers' financial data from credit applications, credit bureaus (CIBIL), and lender databases. The metrics used to evaluate credit include the source of income, age, number of dependents, bank statements, repayment capacity, past and current debts, health, nature of employment, and other assets. It is essential to note that some loans require an in-depth review of primary data like income and current debt. In contrast, others involve a comprehensive analysis of the applicant's financial history.<h2 class="heading-node" id="4d6gomkwk" style="text-align: justify">Steps in Credit Underwriting</h2>The credit appraisal process differs from product to product and also based on the lender type. Here is a broad overview of the steps of credit appraisal.<ul class="list-node" id="v4vjekojl"><li>Credit Processing – In this stage, the applicant fills out and submits a credit application, either in person or online. Lenders garner all necessary data such as loan details, business or individual information, and primary risk-related information for screening the applications. Each FI has a checklist to validate if all essential information is collected.</li><li>Analysis and Review – The lender scrutinizes the application, analyses the accuracy of the information/documents, and determines the creditworthiness. A credit analyst checks against the RBI defaulter list, CIBIL score, POSIDEX report, and ITR. In addition, the lenders assess the overall political and economic risks and evaluate the financial stability and reliability of the applicant.</li><li>Documentation – From credit application to foreclosure of impaired loan and realization of security, each level in the credit cycle is recorded. The documentation is filed in an appropriate cross-indexing system to facilitate review and follow-up. Moreover, all credit applications must be documented regardless of approval or rejection.</li><li>Approval/Sanction – Each FI has predetermined guidelines on the credit approval process for each product. The credit analyst identifies and measures the credit risk against the guidelines and forwards a recommendation to the approval authorities. The approval authorities examine the request and decide whether to reject or sanction the loan. Typically, authorities deal with new credit approvals, renewals of existing credits, and modifications in the terms and conditions of previously approved credits.</li><li>Credit Administration – In this stage, loan agreements are duly prepared, credit files are updated, and renewal notices are sent methodically. FIs allocate credit administration functions to a designated department or individual in credit operations, depending on the size and complexity of the credit portfolio.</li><li>Disbursement – Once the loan is approved, the letter of offer comprising the disbursal amount and the terms and conditions, etc., is sent to the customer or the borrower. The borrower should duly sign the duplicate copy and return it to the FI. Upon receipt of the letter, institutions proceed with the formalities including final documentation, registration of collateral, insurance cover, and vetting of documents by a legal expert. Before funds are released the borrower must comply with pre-disbursement conditions and the loan must be approved by the relevant authorities in the financial institution.</li></ul><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/08/Credit-Underwriting-Blog_1-01.webp" alt="M2P Fintech" title="" width="100%" height="529"><h2 class="heading-node" id="njesobao5" style="text-align: justify">Shift in the Metrics Matrix&nbsp;</h2>Evolution in consumer behavior and the surge in technology adoption resulted in a paradigm shift in digital credit. This made FIs switch from mainstream practices and adopt innovative approaches to render a faster and seamless borrowing experience. Further, the emergence of fintech and the evolution of Artificial Intelligence and API-enabled services broadened the bandwidth of risk assessment.&nbsp; They included data points from alternative sources that genuinely contribute to determining the quality and value of the loan applications. These data points go beyond the regular financial specifics and dwell deep into customers' buying/spending patterns and behaviors. Such data points obtained from non-traditional sources are known as alternative credit data.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/08/Credit-Underwriting-Blog_1-03.webp" alt="M2P Fintech" title="" width="100%" height="529"><h2 class="heading-node" id="nq0zjxcbu" style="text-align: justify">What is Alternative Credit Data?</h2>The alternative data is a collection of information including a customer's utility, rental, insurance, other bills payment track record, employment and travel history, governmental and e-commerce transactions, and property records. The data points exhibit the customer's habits, preferences, behavior, and character that help lenders better understand an individual's financial reliability and stability.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/08/Credit-Underwriting-Blog_1-04.webp" alt="M2P Fintech" title="" width="100%" height="529"><h2 class="heading-node" id="wu0yr03ef" style="text-align: justify">Why Alternative Data?&nbsp;</h2>Over the last few years, alternative data and behavior metrics have created ripples in the financial sector. However, fintechs and other FIs are just at the tip of the untapped potential of alternative data. Utilizing the correct alternative data and metrics can significantly enhance predictive models such as risk modeling, lead scoring, and fraud detection. Drives Financial Inclusion&nbsp; According to a world bank report, there are 1.7 billion unbanked individuals in developing economies like India, Bangladesh, Pakistan, China, Indonesia, and Mexico. In India, lack of credit scores is the stumbling block to achieving financial inclusion. This is predominantly because most working professionals are deprived of access to financial services due to a low or non-existent credit score. Alternative data sources unlock a gamut of opportunities to empower such consumer groups with economic power. It also serves as a significant value addition to applicants and credit grantors. Alternative sources for data and metrics enable fintechs and NBFCs to tap into the unbanked and underbanked population. The alternative data sources are less susceptible to manipulation, and it serves as a source to score the applicants who are underbanked, credit invisible, or generally labeled 'no-hit' or 'thin-file' by traditional models. The insights from alternative data enhance credit access for such consumer groups, who are usually overlooked. For example, first-time credit card/loan applicants do not have a credit history or background that meets specific criteria. Alternative data points help FIs profile such applicants to process their credit requirements. Augments Business&nbsp; Alternative datasets provide a comprehensive and well-rounded picture of consumers' behavior. This helps FIs make better decisions on who to target and design &amp; develop superior products to ensure a higher adoption rate and sustainability in the market.&nbsp;On the other hand, a more accurate assessment of a consumer's risk status ensures loans/credits are both profitable as well as low-risk. Alternative data enables FIs make the following enhancements and stay ahead of the winning curve.<ul class="list-node" id="q4msu49t5"><li>Boosts business agility and market responsiveness</li><li>Capture new market segments</li><li>Develop competitive interest rates</li><li>Create more tailored products and services</li><li>Identify low-risk candidates for automatic loan pre-approval</li><li>Offer loans and credit efficiently</li><li>Eliminate high-risk applicants by having access to extensive data on risky borrowers</li></ul>Fraud Detection&nbsp; The key source for alternative data is digital platforms that provide information through digital automation. Artificial intelligence (AI), Machine Learning (ML), deep data analytics, and anonymous metadata can help detect anomalies in business operations or an individual's transactions. For example, using AI-enabled tools that employ alternative data, lenders can detect financial fraudsters as early as in the pre-qualification stage.<h2 class="heading-node" id="myayq2dc9" style="text-align: justify">Unlocking Value from Alternative Data</h2>Alternative data is the new oil. Before we know it, most legacy banks will join the bandwagon and include alternative data sets in their standard lending strategies. The key to capturing the value of alternative data is recognizing and analyzing the cost/benefit balance and determining the ideal blend of data sources and their impact on profitability. For more insights on credit underwriting and alternative sources write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>.&nbsp; <a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Credit Underwriting - How Alternative Data Sources Help

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_02_WordPress-1.webp" alt="M2P Fintech" title="" width="100%" height="661">Imagine you own a digital wallet. Its primary function is to let you spend viz., shop with partner merchants, make payments, and transfer money to other wallets and bank accounts. Then the same wallet offers a card (any authorized card network Visa, MasterCard, RuPay) to facilitate card-based in-store and online payments. Further, the wallet also comes with a UPI virtual ID to allow payments via QR codes and <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a>.This is payments interoperability making life easy for you.<h2 class="heading-node" id="abd3">What is Payments Interoperability?</h2>Now, there are several definitions for interoperability. But at its core, it is the basic ability of multiple digital systems, applications, and databases to connect and communicate with each other.Payment platforms leverage financial technology to connect and share data among ecosystem partners, viz., banks, payment gateways, payment processors, merchants, and consumers. This integration helps carry out transactions between payment service providers, third-party processors, and other networks without hassles. The interoperability occurs at the origination point, at the network level, or through an intermediary, both in national and international payment systems.Here are a few common attributes of interoperability.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Interoperability_BlogBanner_02_wordpress.webp" alt="M2P Fintech" title="" id="7ruk1ov0f" width="100%" height="661">Payment system interoperability can be at domestic (national) and international levels.<h2 class="heading-node" id="558a">National Payments Interoperability</h2>National payment interoperability is limited to payment systems within a single country. National interoperability usually involves the same type of accounts. It happens between:<ul class="list-node" id="sk8vndtl8"><li>Deposit accounts issued by various banks</li><li>e-money transaction accounts offered by mobile network operators</li></ul>National interoperability is ensured through bilateral agreements between Payment Service Providers (PSP) and Payment Systems Infrastructures (PSIs). Or through a centralized interoperability solution, with standardized regulatory measures stipulated by the central bank.<h2 class="heading-node" id="2998">RBI’s Mandate for Domestic PPI Interoperability</h2>Governments and Central Banks are giving interoperability a significant push to accelerate cashless ecosystems. <a class="link" href="https://m2pfintech.com/blog/rbis-new-guidelines-for-ppis-how-will-it-impact-the-fintech-industry/">RBI</a> aims to make interoperability mandatory for all full-<a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a> <a class="link" href="https://m2pfintech.com/blog/how-to-implement-the-best-prepaid-payment-instrument-ppi-for-your-business/">Prepaid Payment Instruments (PPIs</a>) and acceptance infrastructure by 31 June 2022. The move is to drive inclusion in <a class="link" href="https://m2pfintech.com/blog/ready-to-sneak-peek-into-global-cashless-societies/">cashless payments</a>, and optimally utilize payment instruments like cards and wallets, given the constraint of scarce acceptance infrastructures like point-of-sale (POS) devices, ATMs, QR codes, and bill-payment touch points. Any user who signs up for a wallet, <a class="link" href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">prepaid card</a>, or UPI on PPI rails should be able to make digital payments via any network.LivQuik is the first PPI issuer in India to achieve full interoperability as mandated by the RBI. This feat enables customers to enjoy optimized card and UPI payments across wallets. Similarly, initiatives like <a class="link" href="https://m2pfintech.com/blog/central-bank-digital-currency-cbdc-101-a-primer/">Central Bank Digital Currencies (CBDC)</a> will further drive interoperability, inclusion, and innovation.<h2 class="heading-node" id="d3b9">Need for Interoperable Cross-Border Payments</h2>Interoperability in <a class="link" href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/">cross-border payments</a> is critical to making financial services accessible, affordable, and reliable. It involves coordination between multiple stakeholders, including central banks and regulators. It encompasses technical, regulatory, and usage interoperability to enable quick, convenient, secure, and seamless transactions regardless of the Financial Services Provider (FSP) network.According to a recent Visa survey, only 50% of merchants have a cross-border trade-compatible payment processing infrastructure. Without globally interoperable payment systems, small and medium-sized merchants cannot tap into international trade and markets. Interoperability levels the playing field and eliminates the inefficiencies of a closed-loop payment systems, i.e., payments between users of only one payment provider.An end-to-end interoperable platform delivers access to cross-border payment services through an integrated gateway. It enhances the user experience through its ease-of-use customer onboarding and <a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/">digital KYC.</a>A centralized interoperability platform calls for stringent global regulatory compliance and data security standards for utmost security. It enables faster reconciliations with real-time reporting and data-driven insights into payment patterns and customer behavior. Moreover, an automated platform saves time, reduces human error, and cuts costs. It enables infrastructure and data sharing which helps tech-driven payment ecosystems reach economies of scale.While international interoperability comes with a few challenges, it can be overcome with the support of the regulators, the global schemes, and a compatible business model across international borders and technology.<h2 class="heading-node" id="9178">Global Partnerships with Payment Networks</h2>A clear example of an interoperable <a class="link" href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/">cross-border payments</a> partnership is that between India’s <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> and Singapore’s PayNow. The need for faster cross-border payments and <a class="link" href="https://m2pfintech.com/blog/fintech-a-catalyst-for-financial-inclusion/">financial inclusion</a> has been a catalyst in establishing the link between India and Singapore. The interoperable link between UPI and PayNow, enables instantaneous, cost-effective, and transparent payments across borders.Now for those new to UPI, it is India’s real-time payment system with a Virtual Payment Address (VPA). It is completely mobile-based and supports person-to-person (P2P) and person-to-merchant (P2M) payments and funds transfers.And PayNow is Singapore’s real-time payment system available to all participating banks and non-bank financial institutions. It is also a mobile-based system and enables peer-to-peer funds transfer using mobile numbers, VPA, or Singapore NRIC/ FIN. The UPI-PayNow partnership is only the beginning and is established to foster faster and smoother transactions between India and Singapore.India also holds strategic partnerships with the following payments networks and banks to enable seamless, interoperable transactions on our payments rails.<ul class="list-node" id="tpyzch3q0"><li>Discover Financial Services (DFS), US</li><li>Japan Credit Bureau (JCB), Japan</li><li>Union Pay International (UPI), China</li><li>Royal Monetary Authority (RMA), Bhutan</li><li>Mashreq Bank, UAE</li><li>Lycra Network, France (in the pipeline)</li></ul><h2 class="heading-node" id="1f35">Benefits of Payments Interoperability</h2>Interoperability benefits the entire payment ecosystem, including customers, merchants, end-users, and businesses. In addition to enhancing user experience and helping mitigate security risks, it delivers the advantages below.<ul class="list-node" id="ol9tnl3en"><li>Payment flexibility:&nbsp;The ability to accept all forms of payments is a game-changer. Universal payment acceptance helps customer retention and increases customer reach. Though there are several digital payment systems and digital offerings from payment system providers, customers are not required to sign into multiple systems and complete their <a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a> many times. Interoperability brings issuers and acquirers together to undertake, clear, and settle payment transactions across payment systems, ensuring universal payments and consumer retention.</li><li>Faster payment system: Electronic transactions are the key to reconciling and collecting payments, unlike cash-based systems. Advanced technology and fast internet connectivity make it easier to increase the speed of transactions.</li><li>Secure payment and POS integration: Integration pushes the transaction directly to the payment terminal and eliminates manual entries, thereby enhancing security.</li><li>Low operational costs:&nbsp;Integrated payment platforms reduce operating costs and seamlessly communicate with multiple devices across different financial service providers. It helps save money on adding new payment terminals.</li></ul><h2 class="heading-node" id="0b67">Addressing Challenges — Getting it Right</h2>Getting interoperability right through open <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a>-based platforms is a start toward harnessing and expanding the payments ecosystem. Interoperability can be tricky when dealing with legacy systems. Technical challenges usually comprise systems that use different technical standards, communication protocols, and related software and hardware infrastructure. Another common challenge relates to data and semantics. Payment systems may use different languages and need to be translated. Inadequate translation leads to corrupted or lost data.It is crucial to address the regulatory, technical, and business challenges of interoperability to make cross-border payments affordable, faster, transparent, and inclusive. Strategic partnerships with fintech firms, banks, exchange houses, and Money Transfer Operators (MTOs) with a focus on regulatory compliance and technology innovation will pave the way to overcome challenges and enable frictionless international transactions.<h2 class="heading-node" id="99d4">Need of the Hour for Today’s Generation</h2>Payments interoperability is the linchpin of today’s digitized economy. When done right, it can lead to greater convenience, speed, reliability, security, and seamlessness. It is the need of the hour today, as it enables people from all walks of life to benefit from the convenience that the cashless economy offers. It can increase service offerings, reduce costs, empower the end-user and help improve payment systems. Thus, interoperability is a strong facilitator for financial inclusion.By leveraging <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a>-based <a class="link" href="https://m2pfintech.com/blog/cross-border-payments-a-swift-money-flow-across-borders/">cross-border payment platforms</a> with simple integrations across domestic switches, bank accounts, mobile wallets/e-wallets, MTO transfers, and forex card solutions, we can enable financial inclusion and seamless payments across APAC and MENA regions. With India to start with and then extended globally.Along these lines, M2P is proud to partner with LivQuik for <a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">UPI</a> services on exiting <a class="link" href="https://m2pfintech.com/blog/how-to-implement-the-best-prepaid-payment-instrument-ppi-for-your-business/">PPI</a> offerings like cards, wallets, gift certificates, and other products. Thereby enabling interoperable payments on the LivQuik platform.Want to know more about building interoperable payment systems?Write to us at business@m2pfintech.com.<a class="link au ly" href="https://forms.gle/kJgVoD29t2vcxtbp9" target="_blank" rel="noopener ugc nofollow">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link au ly" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noopener ugc nofollow">LinkedIn</a>&nbsp;and&nbsp;<a class="link au ly" href="https://twitter.com/m2pfintech" target="_blank" rel="noopener ugc nofollow">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Why Payments Interoperability is a Must for Today’s Generation?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_WP_01.webp" alt="M2P Fintech" title="" width="100%" height="447">India’s first step toward building a world-class digital payments ecosystem was earmarked by the launch of the Unified Payment Interface (UPI) in 2016. The advent of UPI transformed the dynamics of the Indian payments landscape. While demonetization drove the adoption of digital payments, the pandemic fueled the surge in UPI, making it the most accepted digital payment mode in the country. Today, UPI is ubiquitous and the largest retail payment system in terms of transaction value and volume.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_WP_02.webp" alt="M2P Fintech" title="" width="100%" height="447">This brainchild of the National Payments Corporation of India (NPCI) is regulated by the Reserve Bank of India (RBI) and supported by Indian Banks Association (IBA).<h2 class="heading-node" id="7e64" style="text-align: justify">What is UPI/ UPI Transaction?</h2>UPI is a mobile payment system that entitles users to transfer money to another party instantly. It facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. A user can link multiple bank accounts in a single UPI-enabled mobile application and make transfers without entering the bank details such as account number, IFSC code, or net banking user-id/password.Although UPI transactions are akin to NEFT/RTGS/IMPS, it’s more standardized across banks, convenient, hassle-free, and have zero/minimal charges. UPI not only enables quick bank transfers from wherever within a few clicks, but it also boosts transparency and interoperability. UPI apps use a unique identifier (otherwise known as UPI ID) to send/request money faster than NEFT and work 24 X 7. It also upholds contactless payment by generating a specific QR code for each user account.<h2 class="heading-node" id="7d62" style="text-align: justify">How does UPI work?</h2>UPI payment system has become a fundamental part of our daily lives. We have leveraged the UPI apps to make payments to merchants/Kirana stores or send/request money from our friends or family.Here is how a UPI transaction usually takes place.<ul class="list-node" id="sp7szltdm"><li>User downloads UPI app from play store</li><li>Specifies the mobile number to connect the device to the service provider</li><li>Upon authorization, creates a profile by setting up the Virtual Payment Address (VPA), otherwise known as a UPI ID</li><li>Links the bank account with UPI ID using the registered mobile number</li><li>Looks up another user/merchant through their mobile number, UPI ID or QR code to initiate a transaction</li><li>The payer enters the UPI pin to complete the transaction and transfer the money to the payee’s account</li></ul>(Note: It is important to note that the sign-up flow for a merchant is identical)Looks like a simple process, right?Well, there is much more going on in the background to make a UPI transaction successful. For example, during a UPI transaction, the money from the sender’s bank account is first transferred to the payment app’s pooling account or general ledger (GL) and then to the receiver’s bank account. This ecosystem primarily involves five entities.1. Payer PSPPayer PSP is nothing but a Payment Service Provider that allows customers to send money via digital transactions. It captures PIN/Biometric authorization credentials, validates, and sends a payment request to the Payee PSP via UPI.2. National Payments Corporation of India (NPCI)NPCI acts as a trusted switch between the banks and Payment service providers (PSPs). The role of NPCI is to manage the data flow between the banks and the payment apps and route it to the correct and verified destinations.3. Remitter BankRemitter Bank refers to the sender/payer’s Bank, also known as Issuing Bank. Upon NPCI’s request, it deducts money from the payee account and sends a response to NPCI once the debit is successful.4. Beneficiary BankBeneficiary Bank refers to the merchant/receiver/payee’s Bank, otherwise known as Acquiring Bank. It processes the credit request from NPCI, credits money to the payee’s account, and sends a response to NPCI once the credit is complete.5. Payee PSPUpon receiving the request, the Payee PSP acts as a Beneficiary PSP and provides the account details against a virtual address credit request. It validates the payee details and sends a response to the UPI to receive funds from the payer.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_WP_03.webp" alt="M2P Fintech" title="" id="hkz1t9gjg" width="100%" height="447"><h2 class="heading-node" id="230c" style="text-align: justify">Types of UPI Transactions</h2>UPI transactions are classified into two types:Direct PaymentDirect payment or push payment refers to sending money. Here, the payer (the sender) initiates the transaction. For example, sending money to your friends/family or paying a merchant at the checkout by scanning a QR code. In direct payments, the user can initiate the transaction using the UPI ID or QR code.Collect RequestA transaction is called a collect request when the payee (the receiver) starts the transaction. Say, you are shopping online, and you choose the payment mode as “via UPI,” and enter your UPI ID, then, a collect request with the bill amount will be sent to your UPI app. Once you accept the request, the payment will be processed. This is a typical example of a collect request. A collect request is also known as a pull payment and can be initiated only by UPI ID.<h2 class="heading-node" id="f8d3" style="text-align: justify">Features and Benefits of UPI</h2>Since its launch, UPI has made financial transactions much easier for account holders. With over 200 banks, many digital wallets, and payment applications supporting UPI, funds transacted over UPI are already more than those transacted through debit and credit cards.Virtual Payment Address (VPA) or UPI ID is the key feature of UPI. UPI Virtual Payment Address is represented as&nbsp;&lt;unique_identifier&gt;@&lt;address_provider&gt; and serves as the addressing layer for a bank account. It helps sustain privacy and keeps a check on financial frauds.Here are some of the benefits of the UPI Payment system.<ul class="list-node" id="wkxiyj1oy"><li>Universal payment system for accessing multiple bank accounts</li></ul>UPI empowers the users to link numerous banking accounts with a single UPI-based app and allows users to choose one account as a default account for making payments. This is the main advantage of UPI, as it eliminates the need for installing individual apps for different banks.<ul class="list-node" id="f2dvpeheq"><li>Unique identifier enables easy and more secure transactions</li></ul>UPI addresses the security and privacy concerns by implementing the user-specific Unique Identifier (UPI ID or VPA). The user can transfer funds using the UPI ID, thus ridding the need to provide the bank account details. Additionally, the UPI ecosystem has single-click two factor authentication to protect users from financial fraud during digital transactions.<ul class="list-node" id="0lmse4odg"><li>Expands business opportunities for banks</li></ul>UPI has made P2M transactions hassle-free and convenient. Almost every local grocery shop and street vendor have QR codes to accept UPI transfers/payments. This empowers banks to tap into the C2B segment. It also supports the growth of ecommerce transactions and has made online shopping quick and effortless as it drastically reduces the time taken to process a payment.In a conventional card transaction, the user enters the debit card/credit card number, expiry date, and CVV code and waits for the OTP to make a payment. With UPI, the user enters the UPI ID and gets an alert on their phone to verify the transaction and completes the payment within a few seconds. This gives banks the opportunity to infiltrate the ecommerce/m-commerce sector.<ul class="list-node" id="hg4d8be12"><li>No need to register the beneficiary</li></ul>Unlike IMPS/NEFT, UPI does not ask users to fill in banking details such as account number or IFSC code to register the payee as a beneficiary. This means the users need not wait for 30 minutes (in most cases) to activate a beneficiary. The interface allows the users to transfer money by simply keying in the virtual address or UPI ID to make the requisite payment.<ul class="list-node" id="premz2wts"><li>Instant transfer — anytime anywhere</li></ul>Customers can do UPI-based transactions round-the-clock, 365 days. Users can make payments or transfer funds instantly from anywhere at any given point of time without worrying about banking hours, bank/public holidays, or even a bank strike.<h2 class="heading-node" id="0586" style="text-align: justify">How is India using UPI?</h2>With over 200 million users and 323 banks on the bandwagon, UPI exhibited stupendous growth in terms of the number of users and transactions. Thanks to the scalability, UPI saw newer heights in May 2022. It clocked 5.95 billion transactions in May 2022 *, the highest number of monthly UPI transactions ever since its inception in 2016. Moreover, it recorded a 10% month-on-month growth not only in total transactions but also in value. (*As per NPCI data).<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Blog-Banner_WP_04.webp" alt="M2P Fintech" title="" width="100%" height="447">Connectivity and convenience are the prime factors contributing to the growing preference for UPI among customers and merchants. The most used UPI-based applications are PhonePe, Google Pay, Paytm, Amazon Pay, MobiKwik, iMobile, Chillr, and the BHIM app. Some popular banking applications with UPI features include Axis Pay, Baroda MPay, Pockets-ICICI Bank, SBI Pay, Yes Pay, and Airtel Money.Scaling up UPINPCI and RBI have constantly been scaling up UPI’s serviceability. At first, UPI payments could be made only via bank accounts. Then, UPI apps allowed users to add debit card details for transactions. Now, RBI has announced Rupay credit cards can be linked to UPI for payments. Experts believe it will not be long before Visa and Mastercard credit cards join the club.UPI 123 PAYUntil recently, UPI was limited to smartphone users with an internet connection. While India is home to over 180 crore mobile phone users, only 78 crore have smartphones and the rest use feature phones. To empower all such users to leverage the mainstream digital payments system, the Reserve Bank of India introduced a new mode of payment mode, UPI 123PAY, on March 8th, 2022.Since its launch, the platform has recorded 21,833 successful transactions with more than 37 thousand registered users. Economic experts claim this is undoubtedly the beginning of digital financial inclusion.Aadhaar-based activationFurthermore, NPCI included a unique feature in UPI for customers who do not own or wish to own debit/credit cards. It enables such users to activate UPI using their Aadhaar number. The OTP required to set up the profile will be sent to the mobile number linked with the Aadhaar card. Upon verification, the user can create the profile and initiate the transaction. However, the feature is yet to be launched for public use.<h2 class="heading-node" id="531e" style="text-align: justify">NIPL and international partnerships — UPI around the World</h2>The success of UPI took the world by storm. In fact, several countries are trying to replicate UPI’s settlement infrastructure. With this incredible technological feat, the Indian fintech industry is at the forefront of some of the most developed countries.NPCI established a special payments arm, NPCI International Payment Ltd (NIPL), to internationalize RuPay and UPI and facilitate real-time bank account payout in India. NIPL inked partnerships with several countries such as the UAE, the US, the UK, Nepal, Bhutan, China, Japan, and Singapore to launch Indian payment rails in their jurisdictions.Some of the prominent international partnerships include LuLu Financial and Al Ansari Exchange (UAE), Discover Financial Services (DFS) (USA), Japan Credit Bureau (JCB) (Japan), Union Pay International (UPI) (China), PPRO Financial (UK), Monetary Authority of Singapore (MAS), Network for Electronic Transfers (NETS), and Liquid Group, (Singapore), and Royal Monetary Authority (RMA) (Bhutan).As an inland initiative, in 2021, Induslnd Bank joined with NPCI to simplify cross-border payments or NRI remittances. The bank is said to use UPI ID to transfer money to the beneficiary. According to the agreement, Induslnd Bank will act as a gateway between the MTOs and NPCI’s UPI system for validating and settling payments into the payee’s account. With this new partnership, IndusInd Bank will become the first Indian bank to offer cross-border payments or NRI remittances via UPI. The product is in the testing phase and is expected to go live in Q2 of 2022.These partnerships are significant milestones in the evolution of the UPI payment system as it is expected to enable hassle-free low-value transactions and cross-border remittances.UPI is the cornerstone of India’s economic transformation and revolution, aiding the country to move into the future with a paperless economy, thereby curbing the money laundering activities and tax evasions. The interface has a tremendous potential to empower the development of next-generation digital platforms for lending and payments.If you wish to implement UPI in your business, write to us at&nbsp;<a class="link au mz" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a><a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Tag: "Financial Inclusion (18)"

M2P Fintech