The Unified Payments Interface (UPI) will take the power of smartphones to its next level in India, making instant money transfers an every-minute possibility. Now, you no longer need to wait for hourly batches of NEFT to send or receive funds or seek MMID code for IMPS transactions anymore.
Developed by the National Payments Corporation of India (NPCI) under the guidelines of the Reserve bank of India, the Unified Payments Interface (UPI) is the new face of cashless payments, fast-tracking India into a cashless economy.
Here is everything you need to know about UPI and how it can help you send and receive instant money.
What exactly is UPI?
The Unified Payments Interface (UPI) is a new system developed by the NPCI and the RBI to aid instant transfer of money using a cashless system. Using UPI services, you just require a smartphone and your banking app to send and receive money instantly or to pay a merchant for your retail purchase.
In the long run, UPI is likely to replace the current NEFT, RTGS, and IMPS systems as they exist today. Financial experts have called UPI to be a ‘Whatsapp moment’ in the Indian banking space, allowing for near-instant money transfers.
How UPI is different from existing payment networks
Currently, if you have to send or receive money, you can make use of either the NEFT, RTGS, or IMPS system. For all of these, you require to furnish detailed information of the recipient. For example, if you are doing a NEFT transfer, you need the bank account details of the recipient, the IFSC code of the bank, bank account number, etc.
For IMPS transactions, you need either the IFSC code of the bank or the bank-generated MMID code. While IMPS transactions are available around the clock, NEFT and RTGS are available for a limited time and not on Sundays or other public holidays.
With UPI, all you will need is the mobile phone number of your recipient and you can send money instantly, any time or day of the week, in a secure environment using just your Smartphone.
The possibilities with UPI
UPI allows you to send and receive money as well as make use of its integrated payment system to make merchant payments. Instead of paying by cash at any store, you can use UPI to make a transfer from your bank account to the merchant’s account instantly.
Send or receive money instantly: UPI uses your phone number, which is linked to your bank account, and generates for you a unique UPI ID. This ID is just like an ordinary email ID. For example if your mobile number is 123456789 and you have a bank account with the State Bank of India, your UPI id may be 123456789@SBI.
To send money from any party, all the sender has to do is open the banking app installed in his or her phone, go to ‘Send money’ section, and facilitate transactions through UPI mode. In the recipient details, the sender needs to add id of the recipient (for example 123456789@SBI). The money gets transferred instantly to the bank account of the recipient once approved by the sender.
Make vendor payments: While out shopping, you need to stand in long queues at the checkout stations to pay by cash or card. Instead, you can make use of UPI and instantly pay your dues to the merchant using UPI payment gateway.
How to use UPI to send money
Sending money from anyone in India is made simple using UPI. All you need to do is open the banking app or UPI app, select the amount to be paid, add the unique id of your beneficiary, and select ‘Send’. You will get a confirmation password on your phone and once you approve the transfer, the money gets instantly transferred to the recipient’s bank account.
Safety and compatibility aspects of UPI
UPI has been developed by the National Payments Corporation of India (NPCI). The system has been designed keeping in mind all security aspects as per RBI regulations. UPI is based on the IMPS framework making transactions highly encrypted and fully secure to use.
UPI is still in its infancy as the system was made available for public in April 2016. Currently, 29 banks have agreed to partner with NPCI for UPI module and more banks are likely to join in soon. Many banks are updating their smartphone banking applications to include UPI transfer option for their customers.
UPI at a glance
- Here is a quick snapshot of UPI and things you need to note before opting for UPI as your preferred payment system
- UPI is the new age financial transaction system based on IMPS module
- Using UPI, you can send and receive money instantly using only a unique id linked to your mobile phone number
- UPI-based financial transactions are available 24/7 including Sundays and public holidays
- UPI transactions need to be approved using your Smartphone app
- NCPI has fixed Rs. 0.50 per transaction as charges for UPI which will appear as IMPS transaction charges in your bank statement
The author is CEO, BankBazaar.com