Unified Payments Interface (UPI) In India: All you need to know

With the introduction of the Unified Payment Interface (UPI), India has taken a significant step toward achieving a cashless economy. This new UPI payment model can use your smartphone as a virtual debit card. UPI has also made instant money sending and receiving possible. So, what is UPI? Let’s learn what UPI means and how it is a crucial step forward for digitising the Indian economy.

Table of Contents

What is UPI?

The full name of UPI is Unified Payments Interface. The introduction of the Unified Payment Interface was India’s first significant step toward achieving a cashless economy (UPI). Your smartphone can now be used as a virtual debit card, thanks to the new feature. UPI can also be used to receive and send money.

Who initiated UPI?

UPI is a joint initiative of the National Payments Corporation of India (NPCI), the Reserve Bank of India (RBI), and the Indian Banks Association (IBA). NPCI is the company in charge of the RuPay payment infrastructure, similar to Visa and MasterCard. It enables different banks to communicate with one another and transfer funds. NPCI is also involved in the Immediate Payments Service (IMPS). UPI is regarded as the more advanced version of IMPS.

What is UPI ID and PIN?

A UPI ID is a one-of-a-kind identifier for a bank account that can be used to send and receive money. A UPI PIN is a four-digit personal identification number that must be entered to authorise a money transfer via UPI. The account holder can select their PIN. This is the process to generate your own UPI PIN:

Select the bank account you want to conduct transactions within the app.
After choosing a bank account, you will be prompted to create your UPI PIN.
A One Time Password will be delivered to the registered mobile number associated with your bank account.
Enter this OTP to obtain your UPI PIN.
Make your four-digit UPI PIN, which will be required for all transactions.

How does UPI work?

UPI is a digital model of transferring funds from one bank to another that does not require the use of an account number, bank name, account type, or IFSC.

To transfer funds using UPI, you must have the following in place:

A checking account
An active mobile phone number (linked to your bank account)
A mobile phone
A connection to the internet
Once you have these items, you will need to register for UPI and generate a UPI mPIN. You are now ready to use UPI after successfully registering and generating an mPIN.

To send or receive funds via UPI, you must have a UPI-based mobile app, such as BHIM UPI, Google Pay, PhonePe, etc.

UPI transfers funds from the sender’s bank account to the receiver’s bank account without disclosing the sender’s or receiver’s bank account information to any parties involved. Regardless of general bank hours, transfers can be made 24 hours a day, seven days a week.

UPI can be applied in three ways:

By entering the sender’s or receiver’s UPI ID (or Virtual Payment Address, VPA),
Scan the UPI QR code to get started.
By entering the account number and the IFSC code of the receiver

The benefit of using this payment method is complete privacy and instant transfer. You can also connect multiple bank accounts to your UPI ID.

What are the features and benefits of using UPI?

One-time assignment

You can use this feature to pre-authorise (Mandate) a transaction for later debit from your bank account. The UPI mandate is to be used in scenarios where money is to be transferred later, but the commitment now made. For example, suppose you have some bills to pay on a specific date in the future. Instead of paying it immediately on that day, you can set it aside using the One Time Mandate feature. As a result, there is no danger of forgetting to send money using this feature. When the mandate is executed, the customer’s account will be debited. The UPI mandate can only be used once.

Connecting an overdraft account to a UPI

Previously, you could link your savings and checking accounts. You can also link your Over Draft Account (OD Account) to the UPI. Through UPI, you can access your OD Account online. You will be able to make transactions instantly, and all overdraft account benefits will be available to UPI users.

The invoice received in the inbox (View and Pay)

Previously, you could only verify the amount being paid and make the payment after entering the UPI PIN when you sent a collect request. However, now, you will be able to check the invoice being paid via a link and verify the transaction details before paying for it. This feature is only available for invoices from verified merchants. Before paying the bill, you can use this feature to cross-check the bills for details such as an amount mismatch or a bill sent incorrectly.

Intention signed and QR Code

With this option, the user will receive additional security signed QR / intent while making payment using the intent or scanning QR. With the signed QR, issues such as tampering with QR codes and having non-verified entities should be reduced. This will cross-check the receiver’s (merchant’s) authenticity and notify you if the QR is not secure. As a result, it adds another security layer for you. In addition, the transaction will be completed faster because an app passcode will not be required in the case of signed intent.

Are UPI payments secure?

UPI transactions employ a highly secure encryption format that is quite difficult to tamper with. The NPCI’s IMPS network processes approximately Rs 8,000 crore in daily transactions. With the advent of UPI technology, this is expected to skyrocket. It verifies each transaction using a two-factor authentication method similar to OTP. However, for validation, UPI PIN will be used instead of OTP.

Banks that support UPI

The following are the major banks that support UPI services:

Federal Bank (Lotza)
UCO Bank (UCO-UPI)
Yes Bank (Yes Pay)
Karnataka Bank (KBL Smartz)
Punjab National Bank (PNB UPI)
Bank of Baroda (Baroda MPay)
South Indian Bank (SIB M-Pay)
Axis Bank (Axis Pay)
Bank of Maharashtra (MahaUPI)
United Bank of India (United UPI)
Vijaya Bank (Vijaya UPI)
Union Bank of India (Union Bank UPI)
State Bank of India (SBI Pay)
ICICI Bank (iMobile)
HDFC Bank (HDFC Bank MobileBanking)

What apps allow UPI usage?

New apps that accept UPI payments emerge daily, including Google Pay, PhonePe, FreeCharge, Mobikwik, and others. Before you begin transactions, you must verify your bank account information to generate a UPI ID on the app.

FAQs

When was UPI introduced?

The UPI payments system was introduced in India in April of 2016.

Who invented UPI systems?

The UPI systems were not invented by a single person. It was introduced in India by the NCPI under the leadership of the then RBI governor, Raghuram G. Rajan.

What is the full form of NCPI?

The full form of NCPI is the National Corporation of Payments in India.

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