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UPI - A Key Player on the Road to Digital India

In 2015, a call was given for a ‘Digital India’, enabling technology to reach millions of lives all over the country. The movement, which transformed the economic landscape of India is attributed with the success of various start-ups and businesses that forayed into the Indian market with a number of innovative products and services.

Digital India movement is also one of the primary boosters for the ‘Digital Payment’ arena that saw the rise of numerous digital payment apps. PayTM is considered the pioneer in digital payments in India. Then came Freecharge, PhonePe and various other apps that allowed consumers to use these apps and make payments at a number of merchant establishments and online shopping sites.

The advantage of using these apps was that it allowed users to link multiple credit and debit cards under a single umbrella. They also gave attractive offers and discounts for using their apps.

Consecutively, the idea of making payments directly from your bank account, without the need to carry debit cards, was seen as a lucrative market. Thus came into existence UPI – Unified Payment Interface.

What is UPI?

UPI stands for Unified Payment Interface (UPI). It enables money to be immediately transferred via your smartphone from one bank account to another. Payments can be rendered via supporting mobile phone apps. The cash transactions through UPI are available 24x7. Eventually, to streamline the digital payment market within the country, NPCI (National Payments Corporation of India) was established.

Unified Payments Interface (UPI) is a portal developed by the National Payments Corporation of India (NPCI) to facilitate interoperability between banks. This is a one-stop solution for using separate bank accounts to carry out transfers from a single app. It allows all account holders to send and receive money through their smartphones with a single identifier – the Virtual Payment Address (VPA) commonly known as the UPI ID – without needing any bank account information. Customers often do not need to know the IFSC code of the beneficiary or payer, bank account details, etc., and this allows the transaction to be quicker. So customers will make quicker transactions to their friends and merchants.

In view of all the above, NPCI conducted a pilot launch with 21 member banks. Dr. Raghuram G Rajan, Governor of RBI in Mumbai, launched the pilot on 11 April 2016. Banks began uploading their UPI powered Apps to the Google Play store on August 25, 2016.

UPI currently has around 100 banks and more than 20 third-party payment partners that offer UPI payment facilities to their users.

Why UPI?

UPI is a unique payment product that allows real time settlement of funds between two bank accounts. The foremost advantage of using UPI is that it removes the need for remembering your bank account details while doing a fund transfer. All you need is the VPA ID of the sender and the receiver to transfer funds instantly. Here are some of the salient features of UPI;

  • Immediate money transfers via mobile device 24*7 days and 365 days.
  • One mobile application for access to different bank accounts.
  • Single Click 2 Factor Authentication – Compliant with the Regulatory Guidelines, but offers a very strong feature of convenient single-click payment.
  • Virtual Payment Address (VPA) for Pull & Push offers enhanced protection also with the customer not expected to enter information such as Card No, Account Number, IFSC etc.
  • Bill Sharing with your friends.
  • Proper approach to Cash on Delivery hassle, race to ATM, or giving the exact amount.
  • Enable payments at your merchant establishment through a single app or in-app payments.
  • One stop shop for your Utility Bill Payments, Counter Payments, Barcode (Scan and Pay related payments.
  • Use this feature for all your needs like Donations, Collections and Scalable Disbursements.
  • Allows you to raise Complaint directly from the Mobile App.

Who are the primary participants in UPI?

UPI is constituted of the following players;

  • Payer PSP
  • Payee PSP
  • Remitter Bank
  • Beneficiary Bank
  • NPCI
  • Bank Account holders
  • Merchants

UPI - Benefits to the participants in this ecosystem

What are the benefits for banks?

  • Single click 2 Factor Authentication
  • Universal Transaction Application
  • Leverage of existing infrastructure
  • Safer, Safe and Creative
  • Single/One Identifier Payment Base
  • Enable seamless transactions for merchants

What are the benefits for customers?

  • Available round the clock
  • One application for access to various bank accounts
  • Virtual ID use is more safe, no password sharing is necessary.
  • Authentication of a single click
  • Present Complaint directly from the Mobile App

What are the benefits for merchants?

  • Seamless collection of funds from customers-single identifiers
  • No hazard of storing the virtual address of the customer as in the Cards
  • Tap consumers who do not have credit or debit cards
  • Suitable for e-Com & m-Com transactions
  • Resolve the problem of collection of COD
  • Single click 2FA Customer Facilities-Seamless pull
  • Payment In-App (IAP)

Financial transactions Available through UPI

The primary objective of UPIs is facilitating seamless transfer of funds between two bank accounts. Here are the transactions you can perform through your UPI App;

Send Money: This function allows the user to send money using the Virtual Payment Address (VPA) or a combination of Account Number and IFSC, or even by scanning the QR code.

Request Money: This function allows the user to initiate a collection request by entering the Virtual Payment Address (VPA). In addition, using your UPI App, money can also be transferred using Mobile if it is registered with BHIM or *99#. It is also mandatory that the mobile number of the customer be connected to the bank account.

Scan & Pay: Customers can pay by scanning the QR code using 'Scan & Pay' and creating QR codes in the Payment Program.

Transaction Records: This option allows a user to search the history of transactions. It also highlights pending UPI collection requests (if any) so that the user can accept or deny payment requests. There is a report problem tab if the consumer is able to make a query about transactions.

Profile Management: The profile management option in any UPI app lets users display the static QR code and payment addresses generated. The QR code can be downloaded and exchanged via various messaging applications such as WhatsApp, Email, etc.

Check Bank Account Balance: Use this option to check the bank account that is connected to the UPI app along with the status of the PIN. The customer can set/change UPI PIN, a bank account linked to their UPI App, by clicking the 'Change Account' tab given in the menu. This feature also allows a user to review their balance of accounts.

What are the requirements to open a UPI account?

  • In order to set up an UPI account, you need the following:
  • An active Bank a/c held in India
  • An active mobile number that is linked with your bank a/c
  • Smart Phone with internet facility
  • Debit Card for setting up the m-PIN and UPI PIN

How to install and register a UPI app?

Most banks and third-party UPI service providers have a dedicated UPI App for their service. You can download them from the Google Play Store or iOS App Store. If there is not a dedicated app, some banks have integrated their UPI service with their mobile banking app. You can use it from there too.

The installation and registration process is pretty much the same for most UPI providers. Just have a look at the below steps:

  • First, you have to link your bank accounts to the UPI app. For that, you have to make sure that your mobile phone number is updated on all your bank accounts.
  • Download and install the UPI App of your choice. 
  • You have to register with the mobile number linked to your bank account
  • You will receive an OTP for device binding. This will link your UPI with your mobile phone.
  • You will then be required to set a login PIN that will allow you to login to the app. This is not the UPI PIN.
  • On the next step, you can enter your personal details like display name or profile picture.
  • Next part is the important part where you link you bank accounts to your UPI account
  • Based on the mobile number, the UPI app will pull up all the bank accounts linked to that mobile number.
  • You have to select one bank account number, that will be your default account to send and receive money.
  • You will then create your UPI Virtual Payment Address (VPA) ID for that bank account.
  • Next, you will set a UPI PIN for that VPA linked to that specific bank account. 
  • Once completing all these steps, you are all set with your UPI account and you can start sending money, receiving money and making bill payments.

How do I send money to another person using my UPI App?

It is very simple to send money to your family and friends using UPI

  • You can choose to send money to a person using their VPA ID, phone number or their bank account details.
  • Open your UPI app
  • Select the option for sending money
  • Select the method by which you want to send them money; VPA ID, Phone number or Bank account details.
  • Enter the relevant details, the correct amount and your PIN number, when prompted.
  • The money transfer is done and both the parties will receive a confirmation message.
  • The amount is directly debited from your bank account and credited to the beneficiary’s bank account.

Can I receive money on my UPI App?

Yes, you can receive money from someone using your UPI App. Here are the steps for that;

  • Login to your UPI App
  • Click on the Receive Money option
  • Enter the sender’s VPA, amount and expiry time
  • The request will then be sent to the payer for approval 
  • Once he approves the transaction, your default account linked with VPA will be credited
  • Both the beneficiary and sender receive an SMS to confirm the transaction

What is ‘Collect Request’? How do I use it?

Request collection is a request sent to you to collect money from you as a bill payment or fund transfer. Keep in mind that money is charged / debited from your account if you accept a collect request. Never approve/authorize an unknown person's application for 'collection.'

How do I respond to a Collect Request that has been sent to me? 

  • You'll get a message when someone sends a request to you to collect money.
  • Click on the collect request notification you receive or login to your UPI App.
  • Go to the notifications section to find the collect request
  • Pick the requested Collect request from pending items.
  • Click the Approve/Reject/SPAM button as per your wish.
  • Enter the UPI PIN to accept the submission. Money will be debited from your account and sent to the beneficiary's account immediately.
  • This is usually used for bill payments or online merchant payments

Can I connect more than one account to a single UPI account?

Yes, you can do that. Choose your current VPA when connecting to your second bank account. If you connect more than 1 account to a VPA, you can set up a default account to send and receive money.

How do I add a bank account to my existing UPI Account?

You can add more than one bank account to your UPI Account. Follow these simple steps to do that:

  • Login to your UPI App
  • Go to your profile section
  • Choose bank accounts option
  • It will list the bank accounts linked to your UPI
  • Choose the option to ‘add a bank account’
  • Enter the bank account details
  • Authenticate the process with your debit card details and OTP
  • The bank account is now added to your account
  • You can set a unique UPI PIN for each bank account
  • Make sure that you don’t share this UPI PIN with anyone

How to reset the UPI PIN for my bank account?

If you forgot your UPI PIN or want to change it at some point, you can do so through your UPI App. Here are the steps to do that:

  • Login to your UPI APP
  • Go to your profile section
  • Choose the bank account for which you want to reset the PIN
  • You will be required to authenticate the process through an OTP PIN
  • Once authenticated, you can start using your new UPI PIN

How to pay an online merchant using UPI?

UPI allows you to make payments for your online purchases. It is very simple and similar to your credit or debit card payments.

  • Add the items you want to purchase on the shopping sites cart
  • Go to the payments page
  • Choose UPI as your payment option
  • Here you enter your VPA ID (XYZ@UPI)
  • You will now receive a collection request on your UPI App
  • You open the app and authorize the transaction by entering the UPI PIN
  • The amount is debited and the payment for your shopping is completed

Is there a limit on fund transfers using UPI?

  • The upper limit mandated by NPCI is Rs. 1 lakh per transaction and Rs. 1 lakh total value of the transaction.
  • A limit of 10 transactions can be initiated within 24 hours of the first transaction.
  • The limitations of the transactions will be determined in compliance with the regulation of the bank.
  • Banks can adjust UPI transaction limits under the upper limits of the National Payments Corporation of India (NPCI) as per the policy of the bank.

What is an UPI Mandate?

UPI Mandate is a feature that allows you to pre-authorize (Mandate) transactions to be debited from your bank account later. The mandate of the UPI is to be used in situations where money is to be transferred later, but the commitment to that is to be made now. It is likely that the sender will forget to send money later in order to establish a mandate or to make a service/merchant payment where this feature may be necessary. The account of the consumer shall be debited when the mandate is fulfilled.

Benefits of UPI Mandate: 

  • Allows you to create mandates for payments that are to be done on a future date.
  • It serves as a promise to both the customer and the merchant in the case of payment/service by the merchant.

How to use UPI mandate on your UPI App?

  • Open the UPI app on your phone
  • Click on the UPI mandate option
  • It will give you four tabs; My Mandates, Create, Scan, and Request Receive
  • My Mandates will show you all the mandates that you have created
  • Scan option will let you create one using the recipient s QR code
  • Request receive will show the mandate request received

Are there any transaction charges to use UPI?

There are no transaction charges to use UPI for your fund transfer activities. However, check with your bank or provider on any charges they may levy.

UPI FAQs

1. What is an UPI-PIN? What happens if I entered the wrong UPI-PIN during a transaction?

UPI-PIN (UPI Personal Identification Number) is a 4-6 digit pass code that you create/set when you first register with this app. You must enter this UPI-PIN to approve all bank transactions. If you have already set up a UPI-PIN with other UPI Applications, you can use the same for BHIM.

  • MPIN banks are different from the UPI-PIN, please create a new UPI-PIN in the BHIM app
  • Please do not share your UPI-PIN with anyone. BHIM will not store or read your UPI-PIN data and the customer service of your bank will never ask for it.
  • If you enter the wrong UPI PIN, the transaction will fail. In case you enter the wrong UPI PIN multiple times, the bank can temporarily block UPI money from my account (this varies from bank to bank).

2. Do UPI money transfers only happen during banking hours?

All payments are immediate and 24/7, regardless of the operating hours of your bank.

3. How is UPI different from IMPS?

UPI provides features that are better than IMPS in the following ways:

  • Provides P2P Pull capabilities
  • Simplifies payments for merchants
  • Single APP for bank transfer
  • Single click two-factor authentication for enhanced security

4. Will the consumer need to register the beneficiary before transferring the funds via UPI? What information would be expected of the beneficiary?

No, beneficiary registration is not necessary for the transfer of funds through UPI as the fund would be transferred on the basis of the Virtual ID, Account+IFSC or Aadhaar Number.

5. Will the customer need a bank account or can this be connected to a card or wallet?

No, the customer cannot connect a wallet to their UPI account, only bank accounts can be attached.

6. Can I connect more than one account to a single VPA account?

Yes, you can do that. Choose your current VPA when connecting to your second bank account. If you connect more than 1 account to a VPA, you can set up a default account to send and receive money.

7. How can I change my default account?

You may switch the default account by selecting the preferred account option on the App. Once you login to the app, go to your profile section and choose your bank accounts. Here, you will find the option to add bank accounts to your UPI.

8. What happens if the transfer transaction fails or is transferred to an incorrect account?

You need to carefully check all the details of the beneficiary before making any transactions. In the event that such an error occurs, you can file a complaint from the application itself via the complaint section. In the event of a failed transaction, the balance will be refunded directly to the account within 7 working days.

9. What are some of the reasons for an UPI transaction to fail?

There are many explanations for a failure of the UPI transaction:

  • The system must have been down
  • False UPI PIN
  • Incorrect receiver UPI ID
  • If the recipient is not on the Bharat Money Interface

10. What happens if my phone is lost or stolen?

If you lose your phone, the UPI PIN needed to approve all transactions would not be known to a third party and will therefore not be able to use the Bharat Interface for Money. In addition, you have to contact the customer service department at your bank to make sure that your account is not misused.

Latest & Update Upi News

UPI Sees Record-Breaking Transactions in June 2021 26 Jul 2021

The NPCI has stated that UPI transactions increased by a whopping 10.6% in volume and 11.56% in value in June, compared to the previous month. The total number of transactions carried out in June was 280 crores (2.8 billion) with a value of Rs. 5,47,...

Read more

The NPCI has stated that UPI transactions increased by a whopping 10.6% in volume and 11.56% in value in June, compared to the previous month. The total number of transactions carried out in June was 280 crores (2.8 billion) with a value of Rs. 5,47,373 crores. PhonePe continues to dominate the UPI market with a share of 45.27% followed by Google Pay (36.47%) and Paytm (11.44%).

BHIM UPI’s Market Share falls below 1%28 Jan 2021

The government-promoted BHIM UPI has seen a dramatic drop in transaction volumes in the last few months. It fell down to just 0.88% of the market share in November 2020. GooglePay and PhonePe have emerged as the top two UPI apps with the majority (ne...

Read more

The government-promoted BHIM UPI has seen a dramatic drop in transaction volumes in the last few months. It fell down to just 0.88% of the market share in November 2020. GooglePay and PhonePe have emerged as the top two UPI apps with the majority (nearly 86%) of market share. To reinvent itself and to appeal to customers, the BHIM app has started offering various discounts and rewards on third-party apps like Faasos, Oyo, ShopClues, etc.

UPI Transactions saw a Huge Growth Spike in 202019 Jan 2021

Recent data by the NPCI (National Payments Corporation of India) revealed the stupendous growth and popularity of UPI payments in the last year. The data shows that the number of UPI transactions have increased steadily month on month. In September i...

Read more

Recent data by the NPCI (National Payments Corporation of India) revealed the stupendous growth and popularity of UPI payments in the last year. The data shows that the number of UPI transactions have increased steadily month on month. In September it was 1.8 billion, October it reached 2.07 billion and in November the number of transactions using UPI stood at 2.21 which is a 6.7% growth over the previous month. UPI has emerged as the preferred payment mode to carry out various transactions like mobile recharges, bill payments, online shopping, paying at local shops, etc.

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