What is UPI (Unified Payments Interface)?
Unified Payments Interface (UPI) is an instant real-time payment system developed by the National Payments Corporation of India (NPCI) in 2016. It allows users to transfer money between bank accounts using a single mobile application and a Virtual Payment Address (VPA) instead of traditional account numbers and IFSC codes. UPI works on top of the Immediate Payment Service (IMPS) and is regulated by the Reserve Bank of India, making it a secure and widely accepted platform across the country.
How Does UPI Work?
When you initiate a UPI transaction, you enter the recipient’s UPI ID or scan their QR code, specify the amount, and authenticate using your UPI PIN. The request goes through NPCI’s central switch, which routes it to the beneficiary’s bank. Once the beneficiary’s bank confirms the details, the funds are instantly debited from your account and credited to the recipient’s account. This entire process usually completes within seconds and is available 24×7, including bank holidays.
Types of UPI (Unified Payments Interface)
- Peer-to-Peer (P2P): Direct money transfers between individuals using UPI IDs.
- Person-to-Merchant (P2M): Payments to merchants via QR codes or merchant UPI IDs.
- UPI 2.0: Enhanced features such as linking overdraft accounts, invoice storage, and mandate-based payments.
- UPI AutoPay: Automated recurring payments for subscriptions, utility bills, and EMIs.
- UPI 123Pay: A USSD and voice-based service for feature-phone users, enabling UPI without internet.
- UPI Lite: An on-device wallet for small-value transactions with minimal authentication steps.
Feature of UPI (Unified Payments Interface)
- Instant Settlement: Transfers complete within seconds.
- Interoperability: Any UPI-enabled app can send or receive payments to or from any bank.
- Two-Factor Authentication: Combines mobile number verification with a secure UPI PIN.
- QR Code Payments: Simple scan-and-pay experience without manual entry of bank details.
- Round-the-Clock Service: Available 24×7, including weekends and public holidays.
Benefits of UPI (Unified Payments Interface)
- Convenience: Only a UPI ID is needed, no need to remember lengthy bank account details.
- Speed: Most transactions complete in under 10 seconds.
- Cost-Free: Free for end users for almost all transactions.
- Inclusion: Works on both smartphones and feature phones, supporting a wide range of users.
- Security: Two-factor authentication and real-time monitoring help prevent fraud.
Uses of UPI (Unified Payments Interface)
- Peer Transfers: Send money instantly to friends and family.
- Merchant Payments: Pay at shops, restaurants, and online stores.
- Bill Payments: Pay utility bills, recharge mobiles, and settle subscriptions.
- Government Services: Pay taxes, fees, and receive subsidies.
- Cross-Border Payments: Emerging use cases for sending money abroad in collaboration with select countries.
Examples of UPI (Unified Payments Interface)
- BHIM: The official NPCI UPI app for straightforward transactions.
- Google Pay, PhonePe, Paytm: Popular third-party apps offering a rich set of UPI features.
- Bank Apps: Almost every major Indian bank’s mobile app supports UPI, such as SBI YONO and HDFC MobileBanking.
UPI Requirements
To use UPI, you need:
- A bank account in India with completed KYC.
- A mobile number linked to that bank account.
- A UPI-enabled mobile application or access to *99# on a feature phone.
- A UPI PIN set up for secure transactions.
How to Do UPI Online?
- Install a UPI App: Download any UPI-enabled app from your smartphone’s app store.
- Link Bank Account: Verify your mobile number and select your bank.
- Create UPI ID: Choose a unique VPA, such as yourname@bank.
- Set UPI PIN: Generate a secure PIN for authorizing transactions.
- Make Payments: Enter the recipient’s UPI ID or scan a QR code, enter the amount, and confirm with your PIN.
How to Do UPI Offline?
- USSD Method: Dial *99# on any feature phone, follow the menu prompts to send money or check your balance without needing internet.
- Voice/IVR: Use UPI 123Pay by calling the dedicated NPCI number to make payments via voice or keypad inputs in low-connectivity areas.
What are UPI Timings?
UPI services are available 24 hours a day, seven days a week, including weekends and bank holidays. There is no scheduled downtime, ensuring continuous access to digital payments.
What is UPI Limit?
- Per Day: Up to ₹100,000 per user.
- Per Transaction (for USSD 123Pay): Up to ₹10,000.
- Daily Transactions: A maximum of 20 transactions per user.
- Special Transactions: Up to ₹500,000 for transactions like hospital payments, educational fees, IPO applications, and government schemes.
What are UPI Charges?
End Users: No fees for sending or receiving money via UPI.
Merchants Using Prepaid Instruments: Interchange fee of up to 1.1% on transactions above ₹2,000 (effective from 2024).
Recurring Payments: UPI AutoPay mandates incur no additional charges for the user; banks and apps generally absorb the costs.
How Much Time Does It Take for UPI Transactions to Settle?
For users, UPI transactions appear to complete in real time often within 10-15 seconds. Behind the scenes, NPCI settles net positions between banks multiple times throughout the day via the IMPS infrastructure, ensuring that all inter-bank dues are reconciled by the end of the business day.
Factors Affecting UPI Settlement Time
- Network Congestion: Peak hours with high transaction volumes may experience slight delays.
- API Response Requirements: NPCI mandates strict response times for payments and status checks to ensure quick processing.
- Bank Processing Speed: Each bank’s backend infrastructure and load can influence how rapidly it handles incoming transactions.
- Peak vs. Off-Peak: Some systems may throttle or prioritize transactions depending on overall network load.
Components of UPI (Unified Payments Interface)
- NPCI Central Switch: The core system that routes and processes all UPI transactions.
- Payment Service Providers (PSPs): Banks and third-party apps that facilitate sending and receiving payments.
- Virtual Payment Address (VPA): A user-friendly identifier that replaces the need for account details.
- Immediate Payment Service (IMPS): The underlying infrastructure that powers instant fund transfers.
- APIs: Secure communication channels between banks, apps, and the NPCI switch.
- Authentication Mechanisms: UPI PIN and two-factor processes that safeguard transactions.
- User Devices: Smartphones and feature phones (through USSD or IVR) used by customers to access UPI services.