UPI has managed to transform the face of digital payments in India. It’s fast, easy and accessible to everyone provided you have a smartphone. But have you ever wondered how it happens? In this blog, we shall help you understand the backend process of UPI in simpler words as well as comprehend the technology that forms this wizardry of the payment system.
What is UPI?
UPI refers to a real-time payment system that enables users to transfer money from one account to another bank account in a click. It is developed by the National Payments Corporation of India, and regulated by the Reserve Bank of India. With UPI, sending as well as receiving money becomes an easy affair using a simple virtual payment address, such as your phone number or email, instead of sharing the bank details with someone. It’s everywhere-from peer-to-peer transactions, to paying bills, to online purchases.
How the Backend of UPI Works
Despite its seamless use on the user interface, the actual backend of UPI entails several processes that provide security, speed, and reliability. So, what are those process steps?
1. User Initiates the Payment
Once the app is opened, payment through UPI begins through a user’s opening of the UPI-enabled app – Google Pay, PhonePe, or Paytm – and initiation of a payment through the VPA of the recipient or a scanned QR code. The user would type in the amount to be transferred.
2. Request sent to the UPI Network
Now, when the user accepts making the payment, the UPI application initiates a request with the UPI network to make this payment. This request with the UPI network would contain information about the sender’s and receiver’s bank accounts, amount, and a unique ID to track the transfer for purposes of authentication and authorization.
3. Authentication and Authorization
UPI makes use of a two-factor authentication process primarily with regard to security. The user authenticates the transaction by entering his UPI PIN. The UPI network then checks his credentials to verify if the PIN keyed is correct as well as if the account of the sender holds a reasonable amount of money for the transfer.
4. Transaction Processing
Upon confirmation of the user details, the UPI system connects to their respective banks, the sender’s as well as the receiver’s for carrying out the transfer. In this case, the sender’s bank will debit the amount from his account and the receiver’s bank will prepare the credit.
After successful processing, the amount is directly transferred from the sender’s account to the recipient’s account. Both sender and the recipient get a confirmation message from their bank about the transaction. For many transfers, the process is completed within a couple of seconds.
6. Settlement
Although the amount has been transferred instantly, the final settlement between banks happens later through a mechanism designed by the NPCI that makes sure that all concerned banks have obtained the right credits or debits.
Security measures in UPI
The agenda of UPI is quite high on being ‘safe’. Encryption and tokenization are used to ensure that sensitive information, say a bank account number, is not revealed in the course of a transaction. Two-factor authentication through your phone and UPI PIN add one more layer of security. Thirdly, UPI also keeps track of fraud and suspicious activities in its transactions, whereas banking services send messages and/or app alerts to the customers about their real-time transactions.
Why UPI is So Popular
UPI’s success is essentially because it’s easy to use, quick, and also safe. Digital payments are now within everybody’s reach even for those not technically savvy. You don’t need to remember a lot of pieces of information like your bank account number and IFSC. All you need for a transaction is just a simple VPA. It’s due to the 24/7 status of UPI so you can send and take money at any time – even on holidays.
Mind Spark Technologies: Your Trusted Software Development Company
Mind Spark Technologies values the technology that has been powering systems such as UPI and can enable you to develop safe, efficient, and scalable software solutions for your business. Our team is expert enough to work on all types of software projects-from simple mobile applications to complex backend systems like UPI-and will be your ideal partner for software development.
As the company that will provide you with a bespoke payment solution, a mobile application, or an enterprise-grade platform, Mind Spark Technologies is equipped to the needed competence for the task. We know the prevalent technologies as well as our pursuit of excellence. We can assure our developers that they are capable of making your idea become a reality, and not only would the software meet the requirements, but also the functionality and security ones.
Though the back-end of UPI appears pretty complex, its innovative design has made digital payments fast and secure for users. It has thus really transformed the rather dull Indian landscape in digital payments with its effectiveness in the prompt and precise management of transactions.
Are you looking for a development team that can handle complex projects like UPI? Then welcome to Mind Spark Technologies. Our developers are excellent in securing systems and designs, reliable systems, but we can be flexible in any kind of software project you’re interested in developing.
Let’s help you build the future of tomorrow’s innovations to meet your business needs. Contact Mind Spark Technologies today and let us show you just how we can assist you in building the future of digital payments and beyond!