How Unified Payment Interface (UPI) can change the way you bank (2024)

Confused about how the Unified Payment Interface can change the way you bank? Here is your guide to understanding how it works.

Mobile banking has gained momentum in India like never before. It has grown exponentially with the introduction of mobile banking applications and the ‘Digital India’ initiative post demonetisation. Just in the last one year mobile banking transactions have jumped over three times, from 1.872 billion transactions in FY 2018 to 6.2 billion transactions in FY 2019.

One of the reasons for this huge uptick in digital transactions is the introduction of the Unified Payments Interface (UPI), that has brought about a significant shift in the way mobile banking transactions are conducted in India. From December 2018 to December 2019, payments through UPI have risen by a whopping 885 percent!

By using UPI, customers no longer need to wait for hourly batches of National Electronic Funds Transfer (NEFT) to send or receive funds or seek MMID code for Immediate Payment Service (IMPS) transactions. Thus, instant money transfers every minute have made financial transactions a breeze.

Here is everything you need to know about UPI and how it can make banking easier like never before.

What exactly is UPI?

Developed by the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI), UPI is a payment system that allows money transfer between any two bank accounts by using a smartphone, thus, enabling instant transfer of money using a cashless system.

Through UPI, you can pay directly from a bank account to different merchants, both online and offline, without the hassle of typing credit card details, IFSC code, or net banking/wallet passwords. Using UPI services, all what you need is the smartphone, mobile number of the recipient and your banking app to make the transactions in a secure environment. UPI is very safe as you are required to share only the virtual address and no other sensitive information. Further, UPI is based on the IMPS framework making transactions highly encrypted and fully secure to use.

Related:Consumers Can Give E-Mandate For Recurring Payments Via UPI: RBI

Where to download the UPI app?

The UPI app of 29 banks such as, Andhra Bank, Axis Bank, Bank of Maharashtra, Bhartiya Mahila Bank, Canara Bank, Catholic Syrian Bank, DCB Bank, Federal Bank, HDFC Bank, IDBI Bank, ICICI Bank, TJSB Sahakari Bank, Oriental Bank of Commerce, Kotak Mahindra Bank, Karnataka Bank, RBL Bank, UCO Bank, Union Bank of India, United Bank of India, Punjab National Bank, South Indian Bank, Vijaya Bank and YES Bank are available on the Google Play Store of Android phones and App Store for iOS users.

The Government of India (GoI) has also introduced an independent UPI app by the NPCI, named Bharat Interface for Money or BHIM app for the benefit of those whose banks are not yet UPI enabled.

However it’s not banks but private operators in the fintech space who lead the UPI race with 90 percent of transactions being routed through them. These include Google Pay, Paytm, PhonePe, Amazon Pay, FreeCharge, MobiKwik and WhatsApp Pay, among others.

What kind of transactions can be performed via UPI?

UPI allows you to send and receive money as well as make use of its integrated payment system to make merchant payments, remittances, bill payments among others but the per transaction upper limit is Rs.1 lakh and the minimum is Rs.50.

How to make a payment transaction through UPI?

For sending or receiving money, UPI will use your phone number, which is linked to your bank account and generate a unique UPI ID which is similar to an email ID like name@kotak or name@okhdfcbank. Simply put, all you would need to do is open the banking or UPI app, select the amount to be paid, type the unique ID of your beneficiary, add remarks (if any) and hit ‘Send’. You will get a confirmation password on your phone and once you approve the transfer, the money will get instantly transferred to the recipient’s bank account. In case of vendor payments also while shopping, you can make use of UPI and instantly pay your dues to the merchant using UPI payment gateway.

Most banks do not charge for UPI transactions till a certain threshold (eg: 50 transactions a month) or up to a certain transfer value (eg: nil charges for transfers up to Rs 10,000). This will differ from bank to bank and charges if any will appear as IMPS transaction charges in your bank statement.

Related:Everything You Need To Know About Google Pay

Pros of UPI

1. Universal single app for accessing through multiple accounts of different banks
2. Since UPI operates on IMPS, the service will be available real time and 24X7
3. 3.Highly secure system with no need of sharing any credential with use of Virtual ID
4. Instant cashless transaction with no timeout scenario
5. Seamless fund transfer with Push and Pull facility.

Cons of UPI

1. The transaction limit for UPI is Rs.1 lakh as against the transaction limit for IMPS which is Rs.2 lakhs per transaction.

Related:Everything You Need To Know About BHIM App

In closing

UPI has revolutionised mobile banking in India, and customers can actually make money on using UPI services. You can earn cashbacks on transfers, discount coupons for various services and even earn a referral commission on inviting your friends to use a certain UPI platforms.