Unified Payment Interface (UPI)

The emergence of technology has made people's daily lives very hassle-free. It would not be wrong to say that technology and concepts like artificial intelligence will change the world so much that every one will depend on it.

The idea of a unified payment interface is evidence of digitalization and technological advancement, which has greatly impacted people's daily lives.

In this article, we are going to know what a unified payment interface is and its importance in the lives of the people in the current situation.

What is a Unified Payment Interface (UPI)?

A unified payment interface is a platform, or we can say an application interface, that was created by the National Payment Corporation of India. It enables a person to transfer money from his bank account to the bank account of any other person within seconds without the need for filling in each and every single detail of the bank account to which the amount is to be sent. Instead, it works on bank-registered mobile numbers to make transactions.

Using a unified payment interface, the users can send money just through a two-step authentication process using an authorized platform or application like GPay, PhonePay, or any other UPI application. The regulatory body for the regulation of the UPI is the Reserve Bank of India, which makes it a more trusted platform for doing transactions of large amounts. It is a completely safe method if all the precautions are followed.

The introduction of a unified payment interface has resulted in a reduction in transactions that were earlier carried out in physical cash. As almost every person is now carrying a smartphone, they prefer to do digital transactions over UPI as it is easy to use, fast and secure. Due to UPI, people do not need to carry cash in physical form everywhere.

Working process of the Unified Payment Interface

For its efficient working, the unified payment system uses the existing platforms, such as the Immediate Payment Service (IMPS) and Aadhar Enabled Payment System (AEPS). Apart from mobile numbers, payments can also be made using UPI unique ID or by scanning bar codes.

While making a payment through UPI, no credit or debit card is needed; neither the sender needs to fill in all the details of the bank account of the receiver; they just need to enter the unique UPI ID of the receiver. Once the ID of the receiver gets identified, the sender can make payments easily without any hassle.

As there is no need to fill in the bank details to make the payment, it makes the unified payment interface safer and more trusted.

Process of Sending and Receiving Money

First of all, to receive or send money, the user must download any authorized or trusted UPI-supported platform/application on their smartphones to proceed further.

The users then need to log in to the application by filling in some details and by connecting their bank accounts to the platform to make transactions. It is to be noted that adding the bank is compulsory, and it is totally safe. However, in order to successfully link an account, the user must use the bank-registered mobile number (or SIM) on the same phone.

The user is then asked to set a 4 or 6-digit PIN, which only the user will know, and the user needs to enter this secured PIN every time before the transaction is made. This step makes the UPI safer and more personal.

If the user sends money to someone, it is called a "push", and if the user receives money through UPI, it is called a "pull".

To make a payment through UPI, the user must provide the UPI ID of the receiver and then select the option "send money", enter the amount to be sent, and then input a secured PIN. After entering the PIN, the transaction will get completed.

To receive money through UPI, the user needs to select the "Collect Money" or "Request Money" option in the platform, and then the user needs to enter the Virtual ID of the person from whom the money is to be requested. Next, the amount that the user wants to collect from the user has to be entered. After that, the user can send a request regarding requesting money through UPI to any other person.

After the user makes the request, the remainder receives a text of request to pay, and if the payer wants to pay, then he may enter the PIN on the platform, and the payment will be completed of the same amount. Conversely, if the user does not want to pay, he can also decline the request.

Services Offered by UPI

UPI not only enables users to make payments instantly but offers many other features too. Using UPI, you can make payments on different platforms like online food delivery apps, shopping or e-commerce platforms, and many other apps. It also allows users to check their transaction history and the balance available in their bank accounts.

NEFT and IMPS are also used to transfer funds, but the difference between UPI and NEFT or IMPS is that UPI does not charge anything extra for the processing. NEFT puts a charge of a minimum of Rs. 2.5 on every transaction. Likewise, IMPS also puts charges the same way on every transaction. Although transactions made through UPI are free, certain banks put limits as norms clash. This is why most users are using UPI on a wide range, which is a good sign.

UPI Applications

The following are the most trusted and commonly used UPI payment applications:

• PhonePay
• GPay (Google Pay)
• BharatPe
• BHIM
• Amazon Pay
• Paytm
• Whatsapp Pay

Transaction Limit of UPI

According to NPCI, a maximum of 20 transactions can be done on UPI per day. While there is a limit on the number of transactions done, there is also a limit on the maximum amount a user can send in a day, and that is up to Rs. 1 Lac. This means users can make payments multiple times but should not cross Rs. 1 Lac limit. UPI helps people to go cashless. However, certain banks allow an upper limit of Rs. 2 Lac per UPI transaction.

Advantages of UPI

• One of the major benefits of using the UPI application is that it makes the transfer of money to any bank account very simple and hassle-free.
• UPI is one of the cheapest ways to make a payment or transfer money to any bank account. The government puts up no extra charges for making payments through UPI.
• It is also very useful for those who are in business as they can collect money from their clients or customers using the feature of UPI, receiving money by making the request of payment.
• The transfer of money is completed within seconds.
• There is no need to fill in the receiver's bank details to make a payment; just the UPI ID of the receiver is required.
• On the UPI payment applications, the users can add all their bank accounts and can pay or receive money through it.
• UPI also offers its users to make payments by scanning a QR code.
• On every transaction, some UPI application also gives coupons or cashback, which the users can consider extra benefits.

Disadvantages of UPI

• There is no doubt that UPI is the fastest way to send or receive money, but sometimes the money gets deducted from the bank but is not received by the receiver. Sometimes, it takes around 48 hours to refund the deducted money.
• There is a limit on the transaction amount, i.e., Rs. 100000 in a day, which can be transacted over UPI. The users cannot send money of more than Rs. 100000 in a day.
• The users are provided with a PIN which they can set of their own choice, but it can be only of 4 or 6 digits. To ensure more security, the length of the PIN must be elongated.
• Sometimes, the payment takes much longer than usual because of the slow internet connection, but this problem can be avoided by using fast internet connections.

Challenges faced by UPI

There has been an enormous growth in UPI usage for transactions recently. Still, the UPI industry has faced a major challenge during the spread of coronavirus in the country. The use of UPI applications declined sharply as the country was under lockdown, and many small businesses could not survive the pandemic. This reduced the number of transactions users would typically make at the store.

After a continuous growth of 12 months, UPI transactions declined rapidly, and in April 2021, less than one billion transactions were recorded. But after the pandemic, the number of transactions made using UPI again started increasing, and now almost every shop or person utilizes UPI applications to make payments.