The Unified Payment Interface (UPI), launched by the National Payments Corporation of India (NPCI), a not-for-profit organisation promoted RBI and owned by a consortium of major banks, seems to have taken off. Transactions on this electronic platform crossed the 150 million mark in January 2018. The number of banks which have become UPI enabled has increased from 21 to 60 in less than 2 years. The value of transactions made on the UPI platform also rose to Rs 15,571.2 crore in January 2018, which is at least 34 times what it was a year ago. So UPI has achieved a hockey stick growth in the last few months going by this data.
Don’t know what’s UPI? Let’s tell you.
The payments platform
UPI is a platform that can be used to transfer funds or make payments digitally. As you might know, funds transfers are usually based on services such as National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) and Immediate Payment Services (IMPS). (Read our article – Funds transfer: What are NEFT, RTGS and IMPS?)
UPI uses the IMPS infrastructure for funds transfer. IMPS allows you to transfer funds to any account almost instantly. So, it can be said that UPI funds transfers or payments are also instant.
So, what’s the difference between IMPS and UPI? There’s a world of difference. While IMPS is used only for funds transfer, UPI is used to make payments, send funds as well as receive funds. The most important difference is that UPI lets you link multiple bank accounts to a single UPI identity. You can use UPI on your phone by downloading any of the UPI apps offered by banks or the government’s UPI app, Bharat Interface for Money (BHIM).
How does UPI work?
Using UPI, you can create a Virtual Payment Address (VPA) by providing your bank account details just once. This VPA will be your UPI id. This id will be unique for each UPI user. You can use VPA/UPI id for all your UPI transactions. This way, you needn’t give your bank account details for every payment or every fund transfer. So, you don’t need to remember the beneficiary’s bank account details such as account number, IFSC code, for transferring funds. Just get their UPI id and transfer those funds instantly.
Features of UPI
Link multiple bank accounts – Unlike the mobile banking app offered by your bank, you can link your UPI identity to multiple bank accounts. So, you don’t need to use multiple bank apps. You can use any of your bank accounts on the UPI app to make payments or transfer funds.
Don’t give your account details – With banking apps, if you want to send money you need to have the beneficiary’s account details and for receiving money, you need to give your account details. This means that bank account details may not be very safe. In case of UPI, you can just get the beneficiary’s UPI id or give yours while your or the beneficiary’s bank account details remain safe.
Immediate transactions – In case of banking apps, you need to wait for a half hour or so to send funds to a payee that you added. When you use the UPI app, you can send funds instantly if you have the beneficiary’s UPI id. There is no need to wait.
Bill collection facility – Someone needs to pay you money? You can use the UPI app to send them payment reminders. If they approve your demand for money, you can get those funds instantly.
Shopping time – You can use the UPI app to make payments for your online purchases. If the merchant has a UPI id, you can even use it to make purchases at your nearest store. Now you can even use the UPI app to book rail tickets at railway ticket counters across the country.
UPI has many benefits over a mobile banking app or a mobile wallet. You can use any UPI app that is available on Android’s Google Play store and Apple’s app store.