What is UPI?
Find out what UPI is, how you can use it and where to register for it.
- UPI stands for Unified Payment Interface.
- It is a mode of instant money transfer.
- You do not need to share or collect sensitive information about bank accounts.
- UPI is safe as it eliminates the risk of carrying cash.
- You can use UPI for multiple purposes, such as paying merchants and utility bills.
The emergence of fintech has made banking much more accessible and convenient. Bank cash counters are no longer crowded as cash withdrawal, and deposit is now just a few clicks away. The adoption of tech for banking and payment through apps has made real-time fund transfer quick and hassle-free. One such application is UPI. According to a report, around 2.3 billion transactions were recorded in February 2021 using UPI in India. Since it was first launched in 2016, UPI transactions have grown over 70% on a year-on-year basis. All this information is evidence of the ever-growing popularity of UPI. Let us find out what is UPI in this article.
What is UPI Payment?
UPI means Unified Payment Interface. It is an application that runs on internet-enabled smartphones. Developed by the National Payments Corporation of India, UPI is a real-time, single-window payment application. In simple words, UPI means a payment interface that allows you to transfer funds from one bank account to another bank account in real-time. With UPI, you do not need to collect or share your sensitive bank information such as your account number, IFSC, bank branch and bank name every time you wish to transfer money. At present, almost all banks in the country are a part of the UPI network.
You can use the UPI platform to transfer money to your family members, friends, colleagues, acquaintances, or practically anyone with a UPI ID. The system directly transfers money to their bank account. Similarly, you can receive funds in your bank account by simply sharing your UPI ID. UPI essentially allows you to transfer funds safely, securely, and seamlessly without revealing any bank-specific information.
Benefits of Using UPI
Having explained what UPI payment is, let us examine its benefits. Using UPI for your everyday transactions can prove to be incredibly useful if you consider the below advantages.
- UPI means simplified e-banking and online payment systems.
- It allows you to transfer funds instantly via your mobile phone.
- You can use it for multiple purposes, including paying your utility bills or paying at the local grocery shop.
- You do not need to carry cash as the UPI system doubles like your digital wallet.
- UPI also eliminates the risk associated with having cash all the time.
- You do not need to enter the bank details of the recipient while sending money.
- You can also receive money by sharing your UPI ID, which is usually your mobile phone number registered with your bank.
How can I use UPI?
You can use the UPI application for payments and receipts of funds. Find out how below:
- Download your preferred UPI-enabled app on your internet-enabled smartphone from the Google Play or iOS App Store.
- Next, you need to set up your account by entering your details, like your mobile phone number and linking it to your bank account.
- To send money, you need to click on 'Pay to Contact' under the UPI Payments tab.
- You should then enter your beneficiary’s mobile number, select their UPI ID, click on the submit button, and enter your 4-digit UPI PIN.
- Your fund transfer will be completed, and both you and your beneficiary will receive an SMS notification of the transaction.
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Things to remember about making UPI payments
- For UPI transactions, both senders and beneficiaries should have downloaded the same UPI app on their phones.
- You will need the UPI ID of the beneficiary, along with yours, to initiate a fund transfer.
- You will be able to see the UPI ID of the receiver in your UPI application.
- You simply need to enter the UPI ID and transfer amount and click on the 'Pay' option, and the funds will be transferred instantly.
- You can also enter the recipient’s phone number, which should be linked to their bank account. This is another simple way of directly transferring funds in the bank account of the beneficiary.
- You can use UPI to pay grocers, merchants, and other retailers. For such payments, you can scan their QR codes and enter the amount you wish to transfer.
- While making online payments using food delivery apps and similar other apps, you can select the UPI payment option. Doing this will take you to the UPI application on your phone. You need to enter your UPI PIN, and the money gets debited from your bank account.
- You can also receive money using UPI simply by sharing your UPI ID or the phone number linked to your UPI application and bank account with the sender.
Where to register for UPI?
Before you can start using it, you need to register as a UPI user by following these easy steps.
- You need to download a UPI application – it can be a bank UPI app or a third-party UPI application.
- Enter your registered mobile number and bank account details.
- Create your unique ID (as prompted by the system), which will be your UPI ID. This is also known as virtual payment address (VPA).
- Link your bank account using the UPI ID/ VPA.
- Set an mPIN for validating every transaction.
That is all you need to do. You can now use your UPI application
Now that you know what is UPI payment and how useful it can be, you should consider downloading a UPI-enabled app on your mobile phone. UPI is changing the way payments are made, thereby reducing the dependence on bank systems for all kinds of fund transfers. It has streamlined transactions easy, making them both easy and secure. If you often use your online banking facility and send or receive money online, UPI application suits can help you.
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*Disclaimer: This article is for information only. We recommend you get in touch with your income tax advisor or CA for expert advice.