All about UPI

Tanisha Sabherwal
Tanisha Sabherwal
August 22, 2021

UPI or Unified Payments Interface was made live by NPCI(National Payments Corporation of India) in 2016 and it has been India's favourite mode of payments ever since. In simple words, it takes the best of IMPS and makes the process mobile friendly.

Participants in UPI

  1. VPA or Virtual Payment Address: These are global identifiers mapped to the bank accounts to facilitate the transfer of funds. It looks very similar to an email id. eg: tanisha.sabherwal@okhdfcbank.
  2. Payment Service Providers (PSP): There are Issuer and Acquirer PSP which creates the VPA and processes a VPA transaction respectively.
  3. Third Party App Provider (TPAP): These are the entities responsible for onboarding users. It is a service provider and participates in UPI through the PSP Bank.
  4. UPI Switch: It is managed by the NPCI through which the acquirer and issuer bank talk and process the transaction.

Virtual Payment Address(VPA)

This unique identifier for payments have some interesting pointers:

  1. One VPA can be linked to multiple bank accounts out of which one is primary.
  2. One bank account can have multiple VPAs issued by different PSPs.
  3. Bank account should be linked to a mobile number for facilitating transaction via UPI.

Structure of a VPA

Structure of a VPA

TPAPs and PSPs

These are the apps on the fore-front of UPI and available for the public to use. TPAP only give the frontend or UI layer to the users, and the VPA access along with the payments flow is handled by the PSP bank. It is responsible to comply with all the requirements prescribed by PSP Bank and NPCI. NPCI has an official list of all TPAPs along with the associated partner PSP Bank.

PSPs are the members of UPI. They connect to UPI for availing UPI facility and enable TPAPs to be able to provide the services to the end-users. PSP banks onboard customers and map their bank accounts to their VPA via their own app or through the TPAP's app.

List of TPAPs and Partner PSP Banks

List of TPAPs and Partner PSP Banks

Technology Service Providers(TSP) and TPAP are synonymous as per NPCI, hence PSP can outsource their UPI services via TSPs or TPAPs.

Bonus Trivia

If you look closely at the list of TPAPs attached above, you would notice Paytm isn't listed as a TPAP. Why is that? Paytm is powered by Paytm Payments Bank (which is why @paytm in the VPA), and the two are separate entities on official records. So, why doesn't Paytm fall under TPAP while Paytm Payments Bank(PPB) is a part of NPCI.

Paytm is regarded as a promoter entity of PPB. As a result, Paytm is wholly administered by PPB and shares the same ownership structure as PPB. In other words, Paytm is a technological platform administered by PPB, and the two companies collaborate as a payments bank.

Same is the case for Airtel & Airtel Payments Bank. However, RBL frowns at this structure because it states, "payments banks are expected to maintain a certain distance – independent operational structures – from the promoter entities".

Source: Entrackr

NPCI lists down the data containing performance of the banks and third-party apps. This clearly shows how fast UPI has grown over a short period of time and has open doors to a lot of innovation within the space.

Resources: NPCI, AuthNCapture, Razorpay