How does UPI works?
We in our day-to-day lives use UPI on large scale. May it be in malls or at restaurants. Ever wondered why we need to give access of location while performing a particular transaction? That’s the main aspect for allowing you to carry out a transaction in fraction of seconds. Let’s learn about it.
UPI is an abbreviation used for the ‘ Unified Payment Interface ’ and is introduced by the National Payments Corporation of India(NPCI).
Say X wants to send money to Y using a QR code. While carrying out a transaction, when X starts the transaction by tapping on ‘Pay’, the app asks the nearby UPI server to initiate a request via PSP. Now UPI server sends Virtual Payment Address(VPA ; usually a mobile number added with @ and bank name ; here Y’s virtual address) to the PSP. Now the PSP decodes Y’s virtual address and asks X to enter the security PIN for authentication. After the confirmation of identity of X, the app asks X to allow location usage. The reason for this is to locate the local server of UPI. Now this local server responds to UPI server bank account details attached with X’s VPA. The local UPI server sends debit request to X’s bank account and a credit request to Y’s bank account. If successful the transaction is carried out. And that’s how we transfer money in fraction of seconds with high security.
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