In 2016, a wave of digital transformation swept across India’s financial landscape with a significant surge in digital payment transactions. This significant growth is attributed to the introduction of novel payment modes such as Bharat Interface for Money-Unified Payments Interface (BHIM-UPI), Aadhaar enabled Payment System (AePS), and National Electronic Toll Collection (NETC). This digital revolution has not only facilitated person-to-person (P2P) transactions but also person-to-merchant (P2M) payments, thereby fostering a more efficient trade environment. Simultaneously, existing payment options such as debit cards, credit cards, Immediate Payment Service (IMPS) and Pre Paid Instruments(PPI) continued to grow substantially.
A Glimpse into BHIM-UPI
Bharat Interface for Money or BHIM is a brainchild of the National Payment Corporation of India (NPCI). It’s a revolutionary initiative aimed at promoting secure, quick, and reliable cashless payments via mobile phones. BHIM is engineered on Unified Payment Interface (UPI), allowing for easy e-payments directly through banks, making it interoperable with other Unified Payment Interface (UPI) applications and bank accounts. UPI, an instant payment system built over the Immediate Payment Service (IMPS) infrastructure, facilitates instant transfer of money between any two parties’ bank accounts.
Understanding Aadhaar Enabled Payment System (AePS)
Developed by the National Payments Corporation of India (NPCI), AePS allows individuals to perform financial transactions on a Micro-ATM by simply providing their Aadhaar number and verifying it using fingerprint or iris scan. This innovative payment system allows for funds to be transferred from one bank account to another using Aadhaar numbers, thereby adding an extra layer of security, as banking details are no longer required during transactions.
The Basics of National Electronic Toll Collection (NETC)
Conceived by the National Payments Corporation of India (NPCI) in 2016, NETC was created to facilitate electronic toll collection at toll plazas using FASTag, a device leveraging Radio Frequency Identification (RFID) technology to enable toll payments directly as the vehicle is in motion. The FASTag (RFID Tag), affixed on the vehicle’s windscreen, allows the user to make toll payments directly from the account linked to the FASTag.
Fast Facts about Indian Digital Payment Systems
| Payment System | Year of Introduction | Developed By |
|---|---|---|
| BHIM-UPI | 2016 | National Payment Corporation of India |
| AePS | 2016 | National Payments Corporation of India |
| NETC | 2016 | National Payments Corporation of India |
About National Payments Corporation of India (NPCI)
The NPCI, an umbrella organization for managing retail settlements and payment systems in India, is an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) according to the provisions of the Payment and Settlement Systems Act, 2007. This “Not for Profit” company, under Section 25 of the Companies Act 1956 (now Section 8 of Companies Act 2013), intends to provide infrastructure to India’s entire banking system for physical and electronic payment and settlement systems.
Unified Payment Interface (UPI): A leap forward
UPI represents an enhanced version of Immediate Payment Service (IMPS), providing round-the-clock funds transfer service to make cashless transactions quicker, more accessible, and smoother. This payment system allows users to send money from their bank accounts as effortlessly as sending an SMS or email.
