Unified Payments Interface or UPI has been developed by National Payments Corporation of India (NPCI) and as an avid user of the service, I can confidently say that it is the best thing to happen to our banking system with respect to ease of banking for customers. It merges different banking services and features under one umbrella. A single UPI ID can be used to check bank balance, make payments at merchants, transfer money using the mobile number or bank account or unique UPI ID.
The UPI platform was launched in April 2016, but it received a big push when private players like PhonePe and Google Tez (now Google Pay) started offering UPI services with reward schemes, cashback offers, and full-page ads in newspapers post demonetisation drive in November 2016.
As per NPCI data, the platform saw a total of 3.1 crores worth of transactions in August 2016, but in June 2019, the transaction amount has increased to 1,46,566.35 crores. From 21 banks onboard the UPI in August 2016, the UPI platform has now a total of 142 banks on board.
For an app to allow UPI transactions, it needs to belong to a bank or payments bank or partner with a banking entity. These are the top apps used for UPI transactions in the country:
Google Pay was previously known as Tez and it is a third-party UPI app. The app has partnered with different banking services like ICICI Bank and Axis Bank to enable UPI transactions. Users can also do mobile recharges, bill payments, buy gold, book train tickets in addition to transferring money using UPI.
PhonePe is also a third-party UPI app and it has partnered with Yes Bank Limited to allow UPI transactions. The app has evolved a lot since its inception and you can use it to transfer money, pay electricity, landline, broadband, credit card, and water bills as well as buy gold and more. The app has also incorporated other apps including food delivery apps, cab aggregator apps, hotel and flight booking apps, coupon apps, e-commerce apps, and more.
BHIM (Bharat Interface for Money)
BHIM app has been developed by the NCPI and many UPI apps have integrated the BHIM UPI into themselves to enable UPI-based transactions.
Paytm is a wallet, a payments bank, and it also offers UPI service. It has integrated BHIM app in itself to offer the functionality. The app can be used to send and receive money using UPI ID, QR code, and more.
Apart from that, PayZapp by HDFC Bank, Freecharge, and Pockets by ICICI Bank are notable UPI apps. WhatsApp also has a UPI functionality and users can select open a chat, tap on the attachment and select Payment to send money. However, the service is in a test run in the country and Facebook is aiming to launch the service soon.
How to set up UPI for your bank accounts
At the start, the number of banks supporting UPI platform were few but now, almost all the banks are on board the platform with major ones having their own UPI app for Android and iOS. To activate UPI for your bank accounts, you must fulfill the below conditions:
*You must have a valid Debit Card for your bank account or accounts you want to link to UPI
*You must have a Mobile Number linked to your account/accounts
*The SIM card with your registered mobile number should be present in the same device on which you are installing the UPI apps
The procedure to set up a UPI account is more or less the same throughout all the UPI apps. Follow the steps below to set up a UPI ID and link your bank accounts with the UPI ID.
*Open the UPI app
*Select your language
*The app will request to have access to send and view SMS to verify your mobile number, manage phone calls to verify your phone with UPI, and the location of your device
*It is compulsory to grant first two SMS and phone access for the service to work, however, you can skip the location access
*Select the SIM registered with your bank account/accounts
*The app will send an SMS on your behalf and verify it automatically
*The app will ask you to set up a 4-digit passcode; you will be required to enter this passcode to open the app in the future
*The app will display a list of bank accounts supported by it; select the bank registered with your mobile number
*You will be asked to enter the last 6-digit of your Debit card number, expiry date, and CVV code
*After it verifies the details, you will be asked to set up MPIN, which is same as an ATM PIN but for UPI transactions via your bank account
*Some banks ask you to register a 6-digit MPIN (like Punjab Bank) while others ask you to set up 4-digit MPIN (like Bank of India)
Your bank account is now successfully linked to the UPI. If you have more than one bank account and you want to link them all to UPI, you can select to add more bank accounts from within the app. You will need to select the bank and follow the same procedure to set up MPIN for other bank accounts as well.
Once you have set up an MPIN for a bank account, you will not need to re-create the MPIN the next time you install the app or migrate to another UPI app to use the platform. Different apps use create UPI IDs but the MPIN remains the same for your bank accounts. Just select the bank linked with your mobile number and enter the MPIN, instead of setting up a new MPIN.
As already mentioned, there are multiple ways to transfer funds using UPI apps. You can use the mobile number, bank account details, QR codes, or UPI ID to send money via UPI-enabled bank account. To check your account balance, find the “Check account balance” in the app interface, tap on a bank account, and enter your MPIN.
Transfer money to your contacts using UPI
You can see your contacts within your UPI apps that are using the same UPI app. You can tap on the contact name, enter the amount you want to transfer and tap send. You will be asked to select your bank in case you have registered more than one bank, then you will be asked to enter the MPIN to initiate the transaction.
The transferred amount gets credit directly into the bank account of the beneficiary. You can also tap on a contact name and ask them for money instead. The person on the other end can choose to transfer the amount you asked or decline it.
Transfer money using UPI ID
As mentioned earlier, each UPI app creates a different UPI ID for you. If the person you want to transfer money is on a different UPI app, you can ask for their UPI ID to directly transfer the money. The UPI ID is pretty much like email address where the initials are commonly your mobile number followed by an @ symbol and the name of the bank to which the UPI belongs.
For BHIM app, it is 9198******@upi; for PhonePe, it is 9198******@ybl (the ybl denotes Yes Bank Limited), for Paytm, it is 9198******@paytm. After entering the UPI ID, you just need to choose your bank and enter the MPIN to transfer the money.
Send money using QR code
Every UPI app gives you the option to generate a QR code and scan a QR code. You can scan a UPI QR code to transfer money or make payment at a merchant by just entering the MPIN or you can generate your own QR code for others to pay you easily. The QR code is simply a shortcut to skip the part where you have to enter the UPI ID to transfer the funds.
UPI to Bank transfer using IFSC code
The UPI platform also works like IMPS where you have to enter the IFSC code, Account Number, and Account Holder Name to transfer money. This method comes in handy when the person accepting the money doesn’t have UPI.
NFC-based UPI transactions
Mobile phones with NFC (near field communication) can be used to transfer money without the need to scan QR code. Two devices need to be in close proximity to identify the receiver and sender. Rest of the procedure is the same. Choose a bank account and enter the MPIN to send money.
Notably, the daily limit for UPI transaction is Rs 1 lakh per day for an account. However, some UPI apps have set a maximum limit for a single transaction.
There is also a limit to the number of transactions which restricts users from making more than 10 payments in 24 hours from an account. However, the 10 payments restriction is only for peer to peer transactions and not payments at merchants.