The Unified Payment Interface (UPI), a digital payment system developed by the Indian government, is poised to bring about a transformative change in the payment dynamics of the Indian stock market. Launched in collaboration with brokerage firms and clearing houses, the National Payment Corporation of India (NPCI) has introduced the beta phase of 'UPI for Secondary Market' starting January 1.

This innovative UPI-enabled service for the secondary market functions similarly to Application Supported by Blocked Amount (ASBA), allowing investors to block funds in their bank accounts for stock purchases instead of transferring them to the broker's account. The Clearing Corporations will only debit the amount upon trade confirmation during settlement, streamlining the payment process. Payouts to clients will be directly processed by Clearing Corporations on a T+1 basis.

Traditionally, the ASBA facility has been limited to buying shares in the primary market, particularly in applying for Initial Public Offerings (IPOs). The introduction of UPI for the secondary market marks a significant shift in how investors engage in stock transactions.

The broader reach of UPI extends beyond stock market payments, touching various facets of people's lives. Previously associated with payments at grocery stores, roadside vendors, or Uber rides, UPI has expanded its scope. Notably, UPI payments through credit cards have emerged as a notable feature. Customers can link their credit cards to UPI apps, facilitating payments to merchants using their credit cards without the need to carry physical cards. This added functionality is offered by several public sector and private banks, contributing to the continual growth and versatility of UPI in diverse financial transactions.