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!
What are the services of UPI?
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.
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.
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.
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!
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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.
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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.
What are the charges for UPI?
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 NCPI 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!
Also read : Razorpay - Effortless online payment mechanisms!
What is the Per Day limit of the UPI?
The NCPA 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.
Upcoming features of the UPI
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.
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.
Just like your smartphone unlocks itself through your fingerprint, the UPI app is set to be ‘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.
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.
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.