Everything You Need To Know About UPI Payments

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UPI payment is one of the most popular forms of making financial transactions and payments today as it has made the process fast and easy for the users. It is also one of the major drivers of a cashless economy in the country today. Here is a quick guide to understanding what UPI is and how you can use it.  

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What Is UPI?

UPI stands for Unified Payments Interface. It is an instant payment system where a person can send payments from their bank account to another person’s account on a mobile platform. Hence, with UPI, it is possible to send and receive payments using a single mobile application. The UPI payment system works 24/7. The National Payments Corporation of India (NPCI) developed the idea of UPI. UPI is controlled by the Reserve Bank of India (RBI) and the Indian Banking Association (IBA). 

To use UPI, the bank with which you have an account has to allow you to use the UPI service. Several banks are already supporting UPI. A number of banks support UPI; some of these include State Bank of India (SBI), HDFC Bank, Axis Bank, Bank of Maharashtra, Bank of Baroda, and Punjab National Bank. Further, your mobile number must be registered with your bank, with both net banking and mobile banking enabled. 

The Need for UPI

While net banking or online banking has certain benefits, it is not as quick or efficient. Netbanking is made for the internet and isn’t as quick for payments between two parties. In the mobile-first age, a mobile solution was needed. And this is where UPI makes the process of financial payments simpler and frictionless.

With UPI, you can make all sorts of payments, including utility bill payments, payments to your local departmental stores, fruits and vegetable vendors, your contacts, and businesses. What works in the favour of UPI is that the transactions can be done in a matter of seconds between the two parties.

How Is UPI Different From Wallets?

UPI payment is different from mobile wallets. Where wallets hold money, UPI allows transferring money directly from one account to another without the need for a third-party application. Mobile wallets currently add an additional security layer and have several third-party integrations, which makes it easier to make payments on different occasions. The UPI ecosystem is yet to reach there, but it has speed and convenience on its side. Wallets may also integrate UPI as a feature to stay relevant.

Key Features and Benefits of UPI

(i) UPI uses the Immediate Payment Service (IMPS) to send and receive instant payments. 

(ii) UPI uses a person’s bank account number with IFSC code, mobile number, and MMID (7-digit unique code allotted by your bank for you to use IMPS).    

(iii) People can make 24/7 transactions via UPI as it is a digital platform.

(iv) One mobile application is sufficient to access different bank accounts.

(v) It uses a virtual payment address. This is a unique identification number given by the bank.

(vi) Each bank gives its own UPI for different mobile platforms. Banks can decide to charge or not charge for the service.

(vii) UPI is a secure payment system, which is not easy to tamper with. Similar to an OTP, it uses a two-factor authentication method to verify a transaction.

(viii) A mobile banking personal identification number (MPIN) is required to confirm payments. 

(ix) UPI can be used to make various kinds of payments – merchant payments, retail payments, utility bill payments, in-app payments, and QR code payments.  

(x) UPI is also available on an unstructured supplementary data service (USSD). This service is particularly useful for people who don’t own a smartphone but a regular GSM mobile phone. Users can dial *99# to use the service. 

(xi) People using UPI on USSD service can avail of services such as sending and requesting money, enquiring account balance, changing MPIN, and non-financial services. 

(xii) You can scan a QR code or a person’s mobile number registered with their bank account for making payments.

(xiii) The current transaction limit is Rs. 1 lakh.

How To Set up a UPI Payment System

To set up UPI on your mobile, follow the below steps:

(i) Choose, download, and install the UPI app from the relevant Android or iOS play store. Examples of UPI apps include BHIM, PhonePe, Paytm, and Google Pay. 

(ii) Choose your bank from the options given in the app and map your bank account to your app.

(iii) To confirm that you are using your bank account, the respective bank will send you a one-time password (OTP).

(iv) Once you verify your number, fill in a few details, and set up a 4-digit password/Pin. Your VPA (virtual payment address) will then be created.

The steps may vary slightly for different apps. 

UPI payment is an excellent alternative to credit cards, debit cards, net banking, and mobile wallets. Hence, if you aren’t already using UPI, you may want to give it a try to experience a faster and secure payment process.