As India moves towards building a cashless ecosystem, payment models such as UPI are at the forefront of the digital India movement. With a few simple steps, platforms such as UPI help transform an ordinary smartphone into a payment gateway. Today’s blog deep dives into what UPI means, how it works, and all other relevant questions.
What is the full form of UPI, and what does it mean?
Unified Payments Interface, commonly referred to as UPI, helps merge many banking services under one roof. In simple terms, think of UPI as your financial address. And just like a bank account number, the UPI address remains unique.
UPI allows instant funds transfer between banks through mobile phones using a two-click authentication process. Users don’t have to enter their bank account details and other information every time a transaction is initiated. In many ways, UPI is an upgrade to the payment method – IMPS. UPI provides a platform for secure and seamless transactions using a unique UPI PIN
UPI was started by the National Payments Corporation of India (NPCI) and the Reserve bank of India (RBI). The pilot was launched on 11 April 2016 by the then RBI governor, Raghuram Rajan.
What is the meaning of UPI PIN?
The full form of UPI PIN is Unified Payments Interface Personal Identification Number. It is either a four or six-digit password that the user can set up when they register themselves on the UPI application for the first time. Users must provide this PIN every time a transaction is made using UPI. Hence, it is strongly recommended not to share the UPI PIN with anyone.
How does UPI work?
To use UPI, one should get the following things in order:
- A bank account
- Internet connectivity
- A mobile number connected to your bank account
- A smartphone
Once these things are in order, you can register on UPI to generate your unique PIN and start using the UPI platform. It is important to note that one must have a UPI-based mobile application such as BHIM UPI to use UPI.
UPI has made the process of money transfer extremely seamless and simple. There is no longer a need to remember the receiver’s account details, IFSC code and other details. We need the UPI ID for the transaction to be completed successfully.
How can I register for a UPI account?
The registration process for a UPI account is fairly easy and only involves three simple steps:
- Download the Bharat Interface for Money (BHIM) UPI app or bank app or any other third-party app that supports UPI payment
- Create your account by filling out details including name, password, Virtual payment address (VPA), UPI PIN and others
- Now, link your bank account with the VPA to complete the process.
How do I generate my UPI PIN?
Here are the steps you need to follow to generate your UPI PIN:
- Choose the preferred bank account in the app you want to use to transact
- Once the bank account is selected, generate your UPI PIN
- An OTP will be sent to the registered mobile number to authenticate the process
- Enter the OTP received
- Create your unique four or six digits UPI PIN.
What is UPI ID?
A UPI ID is a unique address assigned to you, using which someone can transfer and request funds transfer.
How do I make a UPI payment?
First and foremost, you need to download a UPI app on your smartphone and create a virtual ID. A virtual ID essentially is your name@bank name. Most of the banks in the country have enabled BHIM UPI payment systems. Just go to your mobile banking application and click on the UPI icon, and you will be redirected to another page where you can either send or receive payments.
What are the charges associated with UPI transactions?
Currently, there are no charges levied on UPI transactions to promote digital transactions in the country. However, some banks might start charging a nominal fee to facilitate UPI transactions in the coming times.
What is my UPI limit?
UPI limit is INR 1 Lakh per transaction on a given day.
What are the benefits of UPI?
There are benefits to using UPI for all parties involved in the process.
Below are some benefits for the customer:
- Ability to transfer funds 24*7
- Transfer of funds takes place instantly
- No need to enter bank account details, ensuring a high level of security for sensitive information
- Extremely easy to use due to the option of two-click authentication
- All bank accounts of a customer can be managed with a single application
- Not only is it easy to transfer funds, but it’s equally easy to receive funds from another party as well
Benefits for merchants:
- Extremely easy to collect funds
- Funds are received almost instantly
- Easy integration with E-commerce platforms
- No need to share sensitive bank account details
- No additional costs were incurred in setting up the system
Benefits for the banks:
- Creates a seamless and secure transaction ecosystem
- The bank incurred no additional costs
- Faster transactions due to two-factor authentication
What is the difference between UPI and IMPS?
- Ease of process: IMPS process is highly complex as a lot of information such as name, bank account details, IFSC code, and others need to be provided, whereas, for UPI, the only information needed to complete the process is VPA.
- Application integration: For IMPS transfer, the bank’s app from which funds are being transferred is required, whereas for UPI, one can link multiple bank account details on the same application.
- Requesting funds: Using IMPS, one can only transfer funds, but one can also request funds using UPI.
- Authentication process: Authentication for IMPS transactions take place with the help of an OTP, whereas for UPI, the PIN is needed to conclude the transaction.
Are UPI & Paytm the same?
No, UPI and Paytm are not the same. UPI is the platform that allows for direct bank to a bank transfer, whereas Paytm is a digital wallet and acts as the linking key between different bank accounts.
Are UPI & GooglePay the same?
No, UPI and GooglePay are not the same. UPI is the platform that allows for direct bank to a bank transfer, whereas GooglePay is a digital wallet powered by Google.
Are UPI & PhonePe the same?
No, UPI and PhonePe are not the same. UPI is the platform that allows for direct bank to a bank transfer, whereas PhonePe is a UPI based payment application.
Is BHIM UPI free?
As of now, BHIM UPI is a free mode of fund transfer between banks. But in the coming future, the transactions may become chargeable. The expected transaction fee is 50 paisa per transaction.
Is Google Pay Free?
Yes, Google Pay is a free-to-use application, and it does not charge the customers any additional charges for transactions.
What is the daily transaction limit for UPI?
The daily transaction limit for UPI is capped at 10 transactions a day or a total of INR 1 Lakh.
What is credit on UPI?
If you are running short on funds and need to make an instant purchase rather than using your credit card, you can also use credit on your UPI ID using a pay later app that gives a free credit line to the customer for typically 14 days.
Which Credit on UPI / pay later app is the best?
There are multiple pay later applications available in the market. One such application is Freo Pay.
Freo Pay is the perfect platform to secure small credit amounts of up to INR 6,000. It can be used for small and everyday needs. Freo Pay is extremely convenient to use as one can buy whatever they please and pay later with just one bill!
Is UPI a wallet?
No, UPI is a payment interface that allows the transfer of funds between banks, instantly using the mobile alone using a two-click authentication process.
Can money be sent to someone who is not using UPI?
Yes, money can be sent to a party even if they are not using UPI. In this case, you will need the following details to complete the transaction: Bank account number of the receiver, IFSC code and name of the account holder.
Is BHIM made in India?
Yes, the BHIM app is made in India and developed by India’s National Payments Corporation. It helps facilitate secure and seamless payments.
