UPI or Unified Payments Interface is an instant real-time payment system created by National Payments Corporation India which likewise implies that the Reserve Bank of India controls it. It instantly transfers funds between two bank accounts on a mobile app. The most common ones you might have come across in recent times are Paytm, PhonePe, MobiKwik, iMobile, BHIM app among many others. Even the banks that boast of their own UPI app include Airtel Money, Axis Pay, Baroda MPay, Pockets-ICICI Bank, SBI Pay, Yes Pay, and so many others.

In the words of Indian economist Raghuram Rajan’s, the UPI means the WhatsApp moment for banking. UPI is one of the most advanced methods among all the digital payments and here is all you need to know about it!

UPI - Latest News
UPI - Services
UPI - Charges
UPI - Transactions Per Day Limit
UPI - Upcoming Features
UPI - Advantages
UPI - Disadvantages
UPI - Transaction Rules from January 2021
UPI - Benefits over NEFT, RTGS, and IMPS
Conclusion
FAQs

What is UPI? | Unified Payments Interface Explained

UPI - Latest News

19 April, 2021 - UPI transactions in gaming apps may soon be blocked.
Economics Times reported that the surge in UPI transactions surge is due to increasing transactions in gaming apps. NPCI observed a spike in low ticket transactions during IPL matches, which led to apprehensions among NPCI and member banks that increased transaction loads could lead to system outages.

1 April, 2021 - UPI transactions touch new high, cross Rs 5 lakh crore in March.
UPI transaction is touching new heights as it crossed Rs. 5 lakh crore mark in value in March. This is due to the digital adoption surge in India. According to data from NPCI saw 23 Billion UPI transactions whereas IMPS, which allows fund transfer instantly between banks saw 363.14 Million.

UPI - Services

The UPI or Unified payments interface is a payment mechanism that allows instant money transfer without the bank details. Rather than a bank account number and IFSC code, the virtual payment address is utilized to pay through the UPI.

UPI - Unified Payments Interface
UPI - Unified Payments Interface

The most cost-effective way of money transfer

Fund transfer via NEFT entails a minimum charge of Rs 2.5 per transaction while the IMPS charges Rs 2.5 per transaction as well. UPI only charges 50 paise or less per transaction through the Unified payments interface. As such it has the potential to promote the non-cash transactions of small amounts throughout India.

Cash-free functioning

UPIs have made it a possibility for you to transfer a small amount to your vegetable vendor in a matter of seconds. Think Paytm or BHIM cards hanging on the local grocery store replacing the trouble you went through earlier to get a proper change. Think of the lesser time spent in the ATM lines. Going cash-free removes many hassles from your life and makes everything smoother in the age of digital India.

Security

The fact that one avoids using online transactions and card payment because it asks for the bank account details makes people stick with their cash. But the UPI solves this problem. The payment through the UPI does not require the card details or bank account details. You need to just give the virtual payment address. (Think the mobile number linked to your UPI app.)

Real-Time Fund Transfer

Everything about the UPI app is an instant formula. Traditionally, adding new pay for the online fund transfer takes some time. This time varies from half an hour to 24 hours. In UPI, you can add a new payee instantly and transfer funds. Also, the process of fund transfer takes a few seconds with the help of a good data connection which is very accessible for everyone in 2018!

Cheaper Alternative of POS Machine

It is difficult to pay through the card everywhere you go. Most of the merchants don’t have the card swiping machine or sometimes the machines don’t catch signals. The machine in question is known as the POS terminal which is a costly affair for the billing party involved. They have to pay the service charge for each transaction which varies from 1.25% to 2.5% of the transaction value. You would have also faced the situation when the vendor asks the service charge from you. It happens in a competitive market. Keeping the POS terminal is not very beneficial for small traders. But, UPI would do the same work with negligible cost. AS UPI operates through the smartphone, anyone can collect money without spending on the machine. Also, the transaction cost is a mere 50 paisa which is very low compared to the POS terminal.

One UPI app works for all the bank accounts

One might think that Axis Pay only supports Axis Bank accounts but the user gets to choose the UPI app they want to use and link all their Axis and Non-Axis bank accounts with them without any limitation. Be careful to choose the app which gives you maximum ease and options.

One-Stop Solution

The digital wallet has eased the online payments. The mobile recharge, rail tickets, online shopping has become very smooth because of digital wallets. But the number of such wallets are increasing. Paytm, Freecharge, Flipkart and IRCTC want you to keep the digital wallet. Naturally, it becomes a hassle to maintain more than one wallet. The UPI would end this hassle as well. The payment through the UPI is as simple as payment through the wallets. But only one app is enough to pay anywhere. Also, the UPI does not ask for money in advance. Rather, your money remains in the bank account and keeps earning the interest. Whereas, digital wallets don’t give any interest.


List of Banks To get business loans | Startup Loans
Here’s a guide to finding the best bank for your startup loan. In order to simplify the process of obtaining business loans, we have listed the names of a few banks.

UPI - Charges

Unified Payments Interface is developed by National Payments Corporation of India
Unified Payments Interface is developed by National Payments Corporation of India

Yes, the UPI is free of charge at present but there is no in-principal decision to keep it so forever. The UPI is free because of its simple and low-cost design. The NPCI has made UPI bring mobile payments to the masses. It makes UPI a preferred mode of payment even for a small sum. The NPCI would try to keep the cost very low and have indicated that they would keep the range of UPI charges from 0 to 50 paisa per transaction. These are the proposed UPI charges for your reference!


5 Most Successful Recurring Payment Gateways In India
Recurring payments are transaction that offers the merchants to process authorizations. These are multiple authorizations for the same customer provided by payment gateways.

UPI - Transactions Per Day Limit

The NPCI has maintained that while there is no daily limit on the number of transactions, the maximum amount of fund transfer that is possible per day is 1 lac Rupees only. This means that you can pay multiple times to different payees everyday which makes going cash-free a reality.

Some UPI apps like SBI Pay, WhatsApp Money only allow 20 transactions per day which are also enough for regular use in the everyday life of the users.

UPI - Upcoming Features

UPI Features | Authorised Transactions | Authentication
UPI Features | Authorised Transactions | Authentication

In the digital world, everyday people are solving new problems through online methods. UPI has identified the opportunities to relieve the users even further and will most likely come up with these improvements in their newer versions.

Pre-Authorized Transactions

Forgetting to pay your bills can be penalized at times and cause you unnecessary troubles. In the UPI, one can pre-authorize the app to draw money for the selected items directly from the bank account before the due-dates. This system would also work for EMIs and other bill payments. One would have the ease to customize as per the needs and also put a monthly cap on the automatic payments.

Biometric Authentication

Just like your smartphone unlocks itself through your fingerprint, the UPI app is set to be β€˜smarter’. This technology would work on the phones which can capture fingerprints or high-quality iris image. The biometric authentication would end the need for MPIN during UPI money transfer.

Error Resolve

As of now, the UPI gives an error if the same mobile number is linked to multiple people’s bank account. Commonly, the same mobile number is registered to the account of the husband and wife. The UPI would resolve this problem in the next version of UPI.

UPI - Advantages

  • One of the major advantages of UPI is that it is a fast, hassle-free and the cheapest way of money transfer.
  • UPI is also very fast and a safe medium, while you only need a UPI ID for carrying out a transaction.
  • It easy to use as it only requires a single click authentication that involves only two factors.

Β· The user can easily link all their accounts to one ID on the UPI app.

  • You also have an option of scanning with QR code to make online and offline purchases.
  • If the user owns a business, he/she can get payments from clients through this app’s option of collecting payment.
  • While making payments on UPI, the user does not have to pay any charges as it is free by the Government.
  • You also get exciting cashback offers.

UPI - Disadvantages

  • Sometimes there can be a delay in payments, it takes up to 48 hours for the money to get back to your bank account.
  • You can only transfer up to Rs 100,000 and send it one by one.
  • The UPI pin only consists of four to six digits, which should be elongated for more security.
  • Another major disadvantage of UPI is that it is very slow in making payments sometimes, but that can be avoided by using a faster internet services.

UPI - Transaction Rules from January 2021

The Reserve Bank of India (RBI) has come up with the ''positive pay system'' for cheques payments. This system is introduced in order to keep a check on banking frauds. According to positive pay system the user is required to re- confirm their key details for payments that go beyond 50,000. The user however, has a choice to use this system.

Another positive rule for the UPI is that the limits for contactless card transactions and UPI will be enhanced from Rs 2,000 to Rs 5,000 from January 2021. This is done to help expand the use of digital payment in a safe and secure manner, especially during a pandemic.

UPI - Benefits over NEFT, RTGS, and IMPS

UPI vs NEFT

Both the platforms are known to have pros and cons. UPI facilitates instant transfer for free, whereas it can only transfer Rs. 1 Lakh per day. NEFT on the other hand allows the user to transfer funds from any bank branch to any individual having an account with any other bank branch in India. A disadvantage of NEFT is that the cost is higher than UPI and it takes about 12 hours for one NEFT transfer.

UPI vs RTGS

UPI transactions are fast, simple to use and free of charges and is ideal for future payments, loan repayment, or credit card payments. Whereas the Real Time Gross Settlement (RTGS), are said to be of high-value and need to be processed in real time and ideal for the transfer for Rs 2 lakhs and above.

UPI vs IMPS

The Immediate Payments Service (IMPS), is an instant interbank electronic fund transfer service that helps the user to access your bank account and transfer funds immediately and securely. However, with UPI the user can pay directly from a bank account to different merchants, both online and offline, without the hassle of typing your credit card details, IFSC code, or wallet passcodes.

Conclusion

With all the knowledge of UPIs, it is safe to say that people are encouraged to take a step towards going cash-free. Many other improvements are expected in the newer updates so it would not hurt to make the shift and keep up with the new digital times of managing funds.

FAQs

What is UPI?

UPI or Unified Payments Interface is an instant real-time payment system created by National Payments Corporation India which likewise implies that the Reserve Bank of India controls it.

What are the services of UPI?

The services of UPI are Cash-free functioning, Security, Real-Time Fund Transfer, Cheaper Alternative of POS Machine, One UPI app works for all the bank accounts.

What are the charges for UPI?

UPI is free of charge at present.

What are UPI transaction charges?

At present, the UPI transfer limit per UPI transaction is β‚Ή1 Lakh.

Is UPI safe?

Yes, UPI is safe and secure as it has a number of measures that ensures its safety.

Is debit card necessary for UPI?

Yes, the debit card is mandatory to set the UPI pin.

Must have tools for startups - Recommended by StartupTalky

Subscribe to StartupTalky

Get the latest insights delivered to you right in your inbox

Great! Next, complete checkout for full access to StartupTalky.
Welcome back! You've successfully signed in.
You've successfully subscribed to StartupTalky.
Success! Your account is fully activated, you now have access to all content.
Success! Your billing info has been updated.
Your billing was not updated.
Grow your Skills and advance your career with LinkedIn Learning ->