In April 2016, the National Payments Corporation of India (NPCI)—a Reserve Bank of India regulated organisation—launched the United Payment Interface (UPI) payment system in India. UPI is a smartphone based feature facilitating easy and instant inter-bank fund transfer. The key highlight of the United Payment Interface system is that a single mobile application can be easily used to access different bank accounts. It uses the unique virtual ID provided by banks, also known as Virtual Payment Address (VPA) for all digital transactions, including payments and funds transfer. The UPI uses the existing Immediate Payment Service (IMPS) infrastructure—used by net banking—for instant transfer of funds.
How net banking changed the landscape of banking transactions in India?
The advent of net banking completely changed the face of banking transactions in the country. A wide range of services, including bill payment and money transfer could be done without making a trip to the physical bank location. Besides allowing immediate service, the automated service in net banking also allowed customers to keep a track on their funds and transactions. Net banking uses four different modes for making online financial transactions:
- NEFT: National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Apart from existing customers, walk-in customers can also transfer cash up to a maximum of Rs. 50,000 through NEFT.
- RTGS: Real Time Gross Settlement is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is Rs. 2 Lakhs.
- Electronic Clearing System (ECS): ECS is meant as an alternative method for payment transactions regarding utility-bill-payments like telephone bills, electricity bills, insurance premium, card and loan repayments.
- Immediate Payment Service (IMPS): IMPS provides instant, 24X7, interbank electronic fund transfer service. Unlike NEFT and RTGS, which have specified time limits for digital transactions, IMPS is available round-the-clock.
Understanding UPI transactions:
For accessing UPI services, you need to download the bank’s UPI-enabled app on your smartphone. After filling in the requisite details, you can create the unique ID or Virtual Payment Address (VPA). Once you link your VPA with the bank account, you are all set to make digital transactions.
Advantages of UPI transactions vis-à-vis net banking transactions:
UPI transactions have an edge over those carried through net banking. The advantages of UPI transactions are:
Less time consuming:
Regular net banking transactions require the user to add a beneficiary to the account by providing details like bank account number and IFSC code. Then you have to wait for some time before the beneficiary is added to your account. With UPI you can instantly transfer funds without the process of adding a beneficiary.
Simplicity and ease of transactions:
For carrying online financial transactions through net banking, you have to provide details like beneficiary’s account number and IFSC code. In the case of UPI, you just have to provide the unique ID, or VPA—which is the financial address of the beneficiary—to carry out a digital transaction within minutes.
Multiple bank accounts in a single app :
You do not require multiple apps for different bank accounts. You can link all your existing bank accounts in a single app. You also have the option of setting up a default account for making all payments.
Option for making a collecting request for payments:
Unlike net banking, you have the unique option of making a collection request through UPI. You can send a collection request to a person through the app, and also set the deadline for making payment. Once the person approves and makes payment, the amount is instantly transferred in your account.
No charges on transactions:
Unlike net banking, where charges are levied on NEFT and RTGS transactions, UPI transactions do not charge a transaction fee.
Unlike RTGS or NEFT payment via net banking, you can do UPI transactions round-the-clock on all days of the year.
UPI system enables peer-to-peer inter-bank transfers through a single two-click authentication process. Here, you don’t need to provide details like bank account number and other secure details, each time while initiating transactions. The VPA is the complete financial address. UPI transactions provide enhanced security through the feature of secret Mobile-PIN (MPIN), which is known only to you. MPIN is set while linking your bank account with the UPI app.
United Payment Interface has transformed the face of digital transactions in India. It has numerous advantages as compared to net banking and has paved the way for a cashless future. Experience the simplicity of payments by getting your UPI handle today! Download the Finserv MARKETS App and begin transacting with the ease of UPI.
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