The Unified Payment Interface (UPI) provides a single interface that allows seamless interoperability between different payment systems.
How it works
• UPI works on the concept of a virtual payment address.
- Bank accounts, cards and wallets can be mapped to a unique virtual payment address.
• Payments can be made using an account number, mobile number and Aadhaar number (virtual payment address).
- UPI leverages the existing infrastructure for authentication.
The payment gateway process kicks off when a customer orders a product from a payment gateway-enabled merchant. The payment gateway performs a variety of tasks to process the transaction.
1. A Customer Places An Order
Either by clicking ‘Buy’ or an equivalent option or by entering the card details on the merchant website or application.
2. Encryption of Information and Forwarding to Merchant’s Site
If the order is via a website, the customer’s web browser encrypts the information to be sent to the merchant’s web server. And in other cases, this is done via the Secure Socket Layer (SSL).
3. Forwarding Information from Merchant’s Site to the Payment Gateway
This is an SSL encrypted connection from the merchant’s server site to the payment server hosted by the payment gateway.
4. Payment Gateway sends transaction information to the Payment Processor used by the Merchant’s Acquiring Bank
5. Payment Processor forwards transaction Information to the Card Association
The card association also acts like the issuing bank and directly provides a response of approval or declination to the payment gateway.
6. The Card Association receives the authorization request, verifies the request and sends a response back to the processor.
It conveys the success or failure of the request as well as the reason.
7. Payment Processor forwards this information to the Payment Gateway.
8. Payment Gateway forwards it to the Merchant Website.
This process is known as Authorization and it takes about 2–3 seconds, altogether. The merchant then fulfills the order and the above process can be repeated.
9. At the end of the day, the payment gateway performs a process known as Settling.
During which it groups all your transactions together and sends them off to the Merchant’s Acquiring Bank in a single batch via the Processor for Settlement.
10. Payment gateways also record your transactions and allow you to view them using the payment gateway report facilities. This completes a single payment gateway process.
UPI’s benefits
• The use of a virtual payment address affords interoperability and makes one-click payment possible.
- Funds transfer can be initiated by either the payee or the payer.
• UPI eliminates the need for exchanging sensitive information, such as bank account numbers, onetime passwords or phone numbers during a financial transaction.
