With the introduction of the Unified Payment Interface, India has taken a significant step toward achieving a cashless economy (UPI). You can use your smartphone as a virtual debit card under the new payment model.
UPI has also made instant money transfers possible. The QR code concept has effectively eliminated the use of digital wallets.
UPI is a joint initiative of the National Payments Corporation of India (NPCI), the Reserve Bank of India, and the Indian Banks Association (IBA).
The NPCI is responsible for the RuPay payment infrastructure. It allows banks to communicate and transfer funds with one another.
Immediate Payments Service (IMPS) is another NPCI initiative. UPI is the more enhanced form of IMPS.
What is the UPI payment method?Digital modes of transactions are becoming increasingly popular not just because they are easy to use but also for enabling transactions to happen quickly. Unified Payments Interface (UPI) is one such mode. UPI is a system that integrates multiple bank accounts into a single mobile app from any participating bank. This app combines several banking features to allow for the seamless routing of funds and merchant payments under one interface. |
Key participants in UPI payment method
| S. No. | Participant | Definition |
| 1 | Payer PSP | The Payer PSP is the Remitter PSP that provides the PSP app to the Remitter. |
| 2 | Payee PSP | Payee PSP refers to the beneficiary PSP, which enables UPI transactions to receive funds from the beneficiary. |
| 3 | Remitter Bank | A Remitter Bank is a bank that holds the payer’s bank account and receives the Debit of the UPI instruction from the payer to be executed in real-time. |
| 4 | Beneficiary Bank | Beneficiary Bank refers to the bank that holds the receiver’s bank account and receives the credit of the UPI instruction from the payer to be done, either in real-time or periodically through a settlement process. |
| 5 | NPCI | The National Payments Corporation of India (NPCI) is an umbrella organisation responsible for operating retail payments and settlement systems in India. NPCI is a joint initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA), established under the Payment and Settlement Systems Act, 2007, to build a highly secure payment and settlement infrastructure in India. |
| 6 | Bank Account Holder | A bank account holder is someone in whose name a bank account is operated. |
| 7 | Merchant | A merchant is a person who sells directly to the public, either in a store or via the internet. |
Definition of Payment Service Provider (PSP)PSPs (also known as Merchant Service Providers) are third-party companies that assist business owners in accepting online payments via several payment methods, such as online banking, credit cards, debit cards, e-wallets, cash cards, and more. Essentially, they ensure that your transactions get from point A to point B safely and securely. PSPs ensure that transactions are completed – from the beginning, when a customer enters their information and initiates a payment, to the end, when you receive it. |
Features and benefits of UPI payment method
UPI offers a lot of benefits that are listed below:
- UPI enables real-time money transfers via mobile devices 24 hours a day, 365 days a year.
- It gives access to multiple bank accounts through a single mobile application.
- It offers single-click two-factor authentication while also offering single-click payment.
- The customer’s virtual address offers incremental security because the customer is not required to enter details such as Card number, Account number, IFSC code, etc.
- This application allows you to share bills with your friends.
- It is a highly useful alternative to the hassles of Cash on Delivery or running to an ATM to withdraw money for making payments.
- UPI can be used to pay utility bills, make online payments, and make barcode (Scan and Pay) payments.
Things to know about UPI payment method
- Both senders and recipients must have downloaded a UPI app on their smartphones to conduct UPI transactions.
- The user needs the beneficiary’s UPI ID and their own to initiate a fund transfer.
- The receiver’s UPI ID is visible in the UPI app to the user.
- The user needs to enter the UPI ID and the amount that needs to be transferred. Next, they need to click on the ‘Pay’ button for the funds to be transferred instantly.
- The user can also enter the recipient’s phone number, which must be associated with their bank account. This is another straightforward method of transferring funds directly to the beneficiary’s bank account.
- Users can choose the UPI payment option when making online payments through any service provider apps that offer this paymode. It will launch the UPI application on their smartphone. The user must enter their UPI PIN for the funds to be deducted from their bank account.
- Users can also receive money via UPI by simply providing the sender with their UPI ID or the phone number associated with their UPI app and bank account.
What is UPI ID?UPI ID is a unique virtual address assigned to each user that uses the UPI interface to send or accept payments. It is a Virtual Payment Address (VPA) that the sender must enter when transferring money to the recipient’s account. One can generate a UPI ID using your bank’s mobile app or other UPI-enabled digital payment apps. How to create a UPI IDIn five simple steps, users can create their UPI ID. They are as follows: Step #1: Users install their preferred UPI app on their smartphones. Step #2: They log in to the app. Step #3: They select ‘create UPI ID’ from the main menu. Step #4: Upon doing so, the users are taken to a new screen where they must enter the ID prefix. Step #5: Finally, users need to link this payment address to their bank account. And it is done! |
How to register for the UPI payment method
Step #1: The user downloads a UPI app of their choice from the App Store or the bank’s website.
Step #2: The user creates their profile by entering information such as name, virtual ID (payment address), password, and so on.
Step #3: The user selects “Add/Link/Manage Bank Account” to link the bank and account number with their virtual ID.
How to generate PIN for UPI payment method
To use UPI as a payment method, the user must sign up for the service via a UPI app. It can be done through their bank’s mobile banking app or a third-party UPI app. Post that, they need to follow the steps explained below to create a UPI PIN:
Step #1: Users need to open the UPI app of their choice.
Step #2: They need to go to the ‘Bank Account’ section. This section displays all of the bank accounts associated with this app.
Step #3: Users choose the bank account for which they wish to create a UPI PIN. They will see a ‘SET’ option if they have never set a UPI PIN for the bank account.
Step #4: Users enter the last six digits and expiry date of their Debit/ATM card.
Step #5: Their bank will send an OTP to their registered mobile number. Next, the user enters the OTP and UPI PIN for the account and clicks on the ‘Submit’ button.
Once done, users will receive a message congratulating them on the successful generation of their UPI PIN. Post this, users can send money and make payments directly from their bank account by authenticating with their UPI PIN.
Frequently asked questions regarding UPI payment method
What is the daily limit for UPI transactions?
The daily limit on UPI transactions is Rs. 2 lakh. A person can make up to 20 UPI fund transfer transactions per day. This restriction excludes merchant transactions, bill payments, and collect requests.
Can a user use their UPI ID to access multiple accounts?
Yes. If their bank/provider allows it, users can add multiple bank accounts to their UPI app.
Can a user send money to someone who is not a UPI user?
Yes. They will need to enter the receiver bank account number, IFSC code, and account holder’s name to do so.
Are there any risks associated with UPI payments?
No, making UPI payments is completely secure.
Is a debit card required to make a UPI payment?
Yes. To add a UPI PIN, you must first add your debit card.
On a concluding note
UPI has simplified things. Fund transfer is literally at your fingertips these days. Sending or receiving money is not only quick but also secure against data theft.
For initiating a UPI transaction, one does not need to remember or share their bank account information. All these characteristics make UPI the most secure, seamless, and hassle-free payment method, encouraging more and more online businesses to integrate a UPI payment gateway in their websites or apps.
