written by Khatabook | August 23, 2021

All About UPI– United Payments Interface

UPI (Unified Payment Interface) is an immediate Payment System that allows a person with a bank account to pay another person with a bank account money immediately. In addition, the payer (the person paying) can pay the payee (the person receiving the payment) using an address that looks like an email ID (e.g. Ramesh@sbi or Ramesh@icici) called virtual address without having to know the recipients' actual Bank Account Number.

What Is UPI?

UPI stands for Unified Payment Interface, a framework created by NPCI (National Payment Corporation of India) wherein an account holder can use an App on their mobile phone to pay or request money.

UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request, which can be scheduled and paid per requirement and convenience.

Who Launched UPI India?

UPI was developed by NPCI and is regulated by the Reserve Bank of India (RBI). NPCI was launched on 11th April 2016 by ex-RBI governor Shri Raghuram Rajan. UPI was publicly launched on 25th August 2016, and ever since then, it has seen a significant scale-up in transactions.

As of March 2019, there were 142 banks on UPI with a monthly volume of 799.54 million transactions and a value of ₹1.334 trillion(US$19 billion). UPI witnessed ₹1,029.44 crore transactions till August 2019. The mobile-only payment system helped transact a total of ₹17.29-lakh crore during the 37 months of operation starting from 2016.

So, let us understand what an immediate payment system is. The debit from the payer and credit to the payee is immediate. You don't have to wait for even an hour (Like NEFT) for the money that is debited from your account to be credited to the payee's account.

Another way it differs from Net Banking is that you can transfer to any account of a bank that participates in UPI. If you want to transfer money to someone whose account number is not registered in your Net Banking account, that person needs to first register in UPI. You can then add them as a payee and then make a transfer. Here you type in the virtual address of the payee and make the payment. 

Steps you need to follow to get started with UPI payments:

  • Download the UPI app and select your bank from the list of banks registered
  • UPI will send an SMS for an authentication
  • Add your bank account. You need to select your Bank, and your a/c will come up automatically. This will be based on your mobile number linked with your bank a/c
  • Create a Virtual Payment Address
  • Create MPIN
  • Submit

What Is UPI ID?

UPI ID (also called Virtual Payment Address or VPA) is a unique ID you need to create to send and accept money via UPI. Once a UPI address is created and linked with your existing bank account, you can share your UPI address (e.g., nayanth@ybl) with the payer. This applies to all the UPI apps.

Process to create UPI ID:

  • Click on “New User Registration” to verify the Mobile Number
  • An OTP (One Time Password) will be sent from your mobile for verification.
  • The SMS should be sent from the mobile number registered with the bank accounts.
  • In dual-SIM phones, please ensure the SMS is delivered from the mobile number registered with the bank (Please keep the registered SIM in the first slot).
  • After your mobile number is verified, the New Registration screen is displayed.
  • Fill in the required details. Create a six-digit numeric password for logging into the application.
  • After successfully registering with UPI, click on the "Add Bank Account" link.
  • Choose your Bank from the menu; the Bank should be an existing UPI participant.

Also Read: How to Get UPI QR Code for your Flourishing Business?

What is a UPI Pin?

UPI pin is a secret 4–6-digit code issued by your bank when you sign up for mobile banking. UPI Pin stands for Unified Payment Interface pin (UPI Pin). This is used to authenticate the all-fund transfers made using mobile banking over the UPI platform.

How to create a UPI Pin

To create a UPI PIN follow the steps given below -

  • Open Apps like- PayTm, PhonePe, GPay, etc.
  • Click on send money in Account
  • Now fill in your Bank details in the app
  • Select and verify Bank
  • After verification, you'll see an option to create a UPI Pin. Provide details of the following:
  • Debit card details
  • New PIN 4–6 digits

Now, you are ready for UPI working!

How Does UPI work?

  • Banks are connected using a platform called National Financial Switch. UPI is built on top of this platform. In essence, it is possible to transfer money from one account in one bank to another account of another bank instantaneously because of this connectivity. 

The money is transferred instantaneously from one account to another. For example, NEFT transfers happen only during certain times of the day and your fund's transfer requests will get executed in batches. UPI transfers occur at any time of the day. The fund's transfer happens in a few seconds, similar to the money withdrawal that happens at an ATM. 

  • For UPI transfers to happen, both the banks have to be participants of the UPI platform. More than 52 banks in India use UPI such as Airtel Payments Bank, Axis Bank, Canara Bank, State Bank of India etc.
  • 33 banks have developed mobile applications so that UPI can be used whereas 44 banks participate in the UPI platform. 
  • There is one more innovation that has been achieved through UPI. It allows users of UPI to create virtual addresses which look like email addresses. (E.g., 90xxxxxx60@paytm’). 
  • When someone wants to send you money, they do not need to know your bank account details. They just need to know your virtual address. It is easy to remember and gives you some privacy as well. 
  • So,  how UPI works? T he virtual addresses in the UPI help in identifying your bank. This is used by the UPI through which transactions take place. 

Sending Money vs Receiving Money

Sending money on the UPI is called a "push." To send money, the user logs into the interface and selects the Send Money/Payment option. After entering the recipient's virtual ID and the amount desired, the user chooses the account from which the money will be debited. The user then enters a special personal identification number (PIN) and receives a confirmation.

Receiving money through the system is called a "pull." Once the user has logged in to the system, they select the option to collect money. The user then needs to enter the virtual ID for the remitter, the amount to be collected, and the account in which they will deposit the funds.

What are the features and benefits of using UPI payments?

Benefits of UPI:

  • These are the simplest online methods of money transfer.
  • Instant fund transfer to any shopping site, groceries, medical sites, food services etc., without any complications.
  • Can easily pay to nearby medical stores, grocery stores, departmental stores etc.
  • Payment of mobile bills, DTH bills, Gas booking, rent payments, credit card payment etc., easily with your phone.

Features of UPI:

1. Multiple Accounts, One ID

Through UPI, you can handle multiple bank accounts altogether. You can even self-transfer if your bank accounts are in two different banks using UPI through your smartphone.

2. No Need To Disclose Your Account Details

Customers can create a unique financial identity linked to their bank account at the bank's back end. You would need to share only this identity and not your bank account details for making a UPI transaction. Using the unique identity, NPCI would direct the transaction to the linked bank account, and the bank would apply the relevant transaction at its end.

You can share your identity freely without worrying about whether your bank account or card details will be compromised. So, bank account numbers and IFSC codes are no longer required for every transaction.

3. Uniform Authentication Process

As of now, different banks follow different methods for authenticating payments or transactions. UPI will help integrate this authentication process. UPI payment is similar to withdrawing cash from any bank ATM while updating the relevant bank account.

4. Instant Transactions

Earlier, you might have had a few transactions on websites, especially shopping sites, where your transaction either failed or was declined due to multiple layer connections. These are connections that exist between the shopping site, payment gateway and the bank. UPI seeks to make the connections simpler and quicker so that the process becomes more efficient and shoppers can make instant payments.

5. One-Click, Two Factor

Your smartphone hardware would act as the first factor to authenticate the transaction. The second factor would be a One Time Password (OTP) sent to your mobile or a PIN generated earlier. This can be done with a single click. However, it can also be multiple clicks if you enable two-factor authentication which provides additional protection through two passwords.

Are UPI transaction Secure?

Before we dive into more details, it is important to understand what is meant by “security” in the context of UPI payments. Since money transfers can be done through UPI apps, they are encrypted by NPCI’s Immediate Payment Service (IMPS) network. 

There are two key methods that are used for security measures in UPI, which are: 

  1. Two-factor authentication process
  2. UPI PIN is used instead of OTP validation

While physical personality is genuinely simple to check, confirming one's computerised characteristics isn't as straightforward. For maintaining security in UPI, the two-above mentioned procedures are used. 

On account of ATM exchanges, your bank card is the physical aspect of the transaction, and your PIN is what you need to make sure to complete the exchange. For UPI, it includes an additional layer of security by expecting you to make a PIN for your exchanges. To make a PIN, you'll have to enter your card details and confirm an OTP sent by your bank to your enrolled number. For each payment transaction, you need to enter your PIN for approval. Only then you would be able to make a money transfer. 

One unique aspect of UPI is that you have all your payments records that you have done using UPI in “Show Transaction History.” There is no transitional advance where an outsider gets access to your money. To put it plainly, UPI exchanges are immediate bank records to bank account exchanges.

You can easily conduct transactions on Khatabook since it is a trustworthy platform devised for safe and secure transactions like sending and receiving money from clients and vendors.

Banks that support UPI 

The major banks that support UPI services are:

  • ICICI Bank 
  • HDFC Bank 
  • Axis Bank 
  • Bank of Maharashtra
  • United Bank of India 
  • Vijaya Bank 
  • Union Bank of India 
  • Federal Bank 
  • UCO Bank
  • Yes Bank 
  • Karnataka Bank 
  • Punjab National Bank 
  • Bank of Baroda 
  • South Indian Bank 

Which Apps Allow UPI Usage?

Unified Payments Interface (UPI) system is a smart platform through which a user can send & receive funds using Virtual Payment Address (VPA). Hence, the funds will be straightaway debited from the user’s bank account. UPI App for Android and other mobile platforms, such as iOS, are available these days. Let us check some of the efficient apps that have adopted the UPI system for catering for a wide range of customers: 

1) Google Pay

2) PhonePe

3) BHIM App

4) Paytm

5) MobiKwik

6) Airtel Payments Bank

7) Google Tez

8) iMobile

9) Axis Pay

10) BOB UPI

Limits in Google pay

The google pay transactions are limited to ₹1 lakh. You can only transfer 1 lakh rupees through Google Pay even though UPI has no transaction limit. It also depends on the bank you are using. Some banks provide transactions of less than 1 lakh only. For those bank accounts, you cannot transact beyond the limit. 

Also Read: How Secure is BHIM UPI? | A Complete Guide

PhonePe app consists of multiple payment options, each having its different limits

  1. For Wallet transactions: New RBI guidelines cap your monthly wallet top-ups to Rs. 20,000 and a maximum per transaction limit of Rs. 1,00,000 per day.
  2. For Bank account transactions (UPI): Same limits as enforced by your bank for UPI transactions.
  3. For Credit/Debit card transactions: Same limits as enforced by your card issuer/ bank.
  4. For wallet balance withdrawal: You can withdraw up to Rs. 5000 from your wallet balance into your bank account per transaction.
  5. For SBI bank UPI transitions: Your limit for one day is 1 lakh and for one month 30 lakhs.

Conclusion

UPI payments are the next big thing in mobile payments and have changed the face of financial transactions through smartphones. As of now, 100 banks have adopted UPI, while others are expected to follow it soon. Its usefulness in money transactions is the biggest reason why this payment process is gaining popularity. With UPI payments, you can receive or pay money from the comfort of your home. Moreover, it helps in easy and secured transactions. 

We hope that we have been able to provide you with valuable information on how UPI works. Stay updated with the latest financial blogs and informative articles on Khatabook.

FAQs

1. What does UPI stand for?

UPI full form in Banking is a Unified Payment Interface.

2. Are UPI and BHIM the same?

UPI stands for Unified Payment Interface, and BHIM stands for Bharat Interface for Money. With BHIM, you can make UPI transactions. Just like BHIM, there is Axis Pay, Vijaya UPI, Canara Bank, Syndicate Bank UPI.

3. How do I set my UPI-PIN with the bank directly?

You can set your UPI pin on any PSP app using your debit card details.

4. What happens if someone forgets the UPI pin?

In case someone is unable to remember the UPI pin and wants to regenerate it, it can be done by using a debit card. 

5. Does a customer need to register before remitting funds using UPI?

Yes, a customer needs to register with their PSP before remitting funds using UPI and link his accounts.

6. Is there a per-transaction limit?

The per transaction limit through UPI is Rs.1 lakh.

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