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Unraveling The Technical Stack Of UPI Apps: Layered System

Modern finance is all about providing ease, convenience, flexibility, and transparency, all at a single avenue. With the plethora of mobile and web-based applications providing myriads of financial operations and wealth management options, narrowing down the best one for us becomes an arduous task. Whether budgeting, investing, financial planning or a savings app, advanced technology has taken over all the domains.

Similarly, with the array of features available on multiple UPI payment apps, hunting for the one that suits us the best is a complex process. No matter how much we fuss about the discount coupon, cashback, payback points, and other gift vouchers, an ideal UPI app is the one that provides us with a hassle-free experience while transferring funds and the one that prioritizes the safety of our personal financial information.

Hence, in this blog, we will dive deep into the mechanism responsible for the smooth functioning of UPI payment apps, be it Fave, Phone Pe, Gpay, or Paytm.

In India, real-time payment apps were developed by National Payment Corporation, and it has been a groundbreaking innovation since then as millions of people in the country rely on these apps and other digitally enabled financial platforms, such as Fave & Jupiter Money, to facilitate their daily financial transactions and earn with the utmost convenience and sense of security.

It functions as a three-layered technological stack where every layer performs its designated functions:

  • User-layer: it is the interface that comes into direct contact with the end users in the form of web and mobile apps like Peytm, and it provides a platform for them to link a bank account to a virtual payment address. It allows them to communicate with other users without sharing their actual details. While transferring funds, users need to furnish this VPA or the mobile number of the recipient and authenticate it by providing the secret pin known as Mpin. Several payment modes are available, such as merchant & bill payments, peer-to-peer transfers, remittances, etc.
  • The middleware layer: it is the layer that connects users to the bank, and NCPI is the host in this layer, which ensures that all transactions are authenticated and authorized. Once the payment is initiated, the request is sent to the recipient bank, which checks the availability of funds and verifies the VPA or the Mpin, and once confirmed, the notification is sent to NCPI. After this, NCPI forwards this to the user’s bank, and the bank, in return, debits the account and sends the confirmation to the NCPI, and the final confirmation is sent to the user eventually.
  • The bank layer: it is the ultimate backend system that manages all the transactions, each bank has its own UPI system, which is connected to the NCPI, and every time the user initiates a transaction, details are verified and confirmed by the banking bodies. These banks can authorize transactions only if they comply with the guidelines issued by the Reserve Bank Of India (RBI). This is undoubtedly the layer that is significantly responsible for the authenticity of transactions and the privacy of user data through end-to-end encryption.

Individuals and businesses also leverage this technology in various forms to ease the vendor payment process, eliminating the need for a point-of-sale terminal or payment gateway. With the advent of the latest features, such as UPI Lite, that can enable transactions of up to or under Rs 200 without requiring the Mpin, it will be a complete game changer for India’s digital payment landscape. Similarly, other savings applications like Magicpin are growing in popularity for providing the best deals for retail customers, heavy discounts, and recurring rewards.

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