What is UPI ID and how does it work? :- www.deekpay.com

Launched in 2016, the Unified Payments Interface (UPI) was seen as a way to simplify digital payments. Over the years, it has established itself as a key player in processing large volumes of payments on a daily basis.In October 2021, UPI recorded over 4 billion transactions, a new all-time high for the platform, with a transaction value of over Rs 7.71 trillion.

With UPI surpassing net banking and other card-based payment methods in 2020, Indian consumers are gradually shifting to using UPI.

Transactions through the medium of UPI reached Rs 654 crore in September 2021, which is nearly two times more as compared to the figures for the same period in 2020. The number of UPI-enabled banks has also increased from 174 to 259.

What is UPI?

A report released by Macquarie shows that UPI payments accounted for 101 TP3T of all retail payments in the first four months of 2021.This growth is staggering considering that its share was limited to 21 TP3T a few years ago.

In 2016, the National Payments Corporation of India (NPCI) partnered with the Reserve Bank of India (RBI, India's central bank) and the Indian Banks' Association (IBA) to develop a modernised payments solution designed to enable banks to seamlessly transfer funds for individual account holders. This collaboration culminated in the development of the UPI platform.

Unified Payment Interface or UPI is a banking interface that allows users to transfer funds between bank accounts through a single window. It is an advanced version of IMPS and NEFT and is designed to eliminate the need for users to enter credentials before each transaction.

Features of UPI Payments

UPI aims to take the hassle out of digital payments. Here are the key features of UPI payments:

reliably

A few years ago, most of our digital payments would fail or take too long to process, which frustrated us and we were always looking for an innovative solution. With the advent of UPI, reliability has become one of the most prominent features of digital payments. It gives users greater control and eliminates the need to maintain multiple third-party applications for different purposes.

Real-time trading

In the past, NEFT transfers took hours to move funds between bank accounts, which was the fastest speed at the time. UPI, on the other hand, enables real-time transfers. Customers simply click on the payment button, verify their credentials, and then make the payment within seconds. This enables customers to use digital payments for a variety of everyday tasks such as buying medicines, vegetables, paying for Uber journeys, etc.

No transaction limit

What do we want our digital bank payment to look like? We want it to be able to handle any amount required (capped for security reasons).UPI does exactly that. It allows users to transfer at least Rs 1 crore easily. Know more about UPI transaction limits.

No transaction costs

RTGS and NEFT have been criticised for charging fees. With UPI, you can send any amount without paying a single cent. This provides a hassle-free and convenient experience for users.

non-exclusivity

Do you only have one application that supports UPI? Good, it works fine. If you want to make UPI payments even though you don't have an internet connection, fortunately, it's possible. All you need to do is send a specific message that enables your bank to perform the transaction on your behalf. This allows people living in areas with limited internet connectivity to seamlessly adopt digital payments.

Check out this blog on how to create a UPI ID.

How does UPI ID work?

If you want to make UPI transactions, you need a VPA or virtual payment address (e.g. - Joedempo@oksbi). You can link multiple bank accounts to the same VPA for UPI transactions. But how does it work? In fact, multiple entities work together to ensure smooth transfer of funds.

The following are the relevant entities involved in successful UPI transactions:

Payment Service Provider (PSP)

Applications like BHIM are available to consumers to initiate and complete UPI transactions.NPCI issues certificates to specific applications allowing them to conduct UPI-based transactions and issue UPI logos. Currently, there are over 20 third-party applications that can perform UPI transactions.

NPCI

NPCI is funded by a large number of banks across the country and is a non-profit organisation.RBI set it up to facilitate the flow of data between banks and to ensure that payments are made through permissible mediums. Users can register for these applications and create different UPI IDs for different UPI IDs to help users with UPI payments.

Sender's bank

The next party involved in a UPI transaction is the sender bank or the issuing bank. These institutions receive a request from NPCI to debit the sender's account. When the debit is completed, the sender bank notifies the transaction that it has been processed.

Recipient bank

The recipient bank or acquiring bank is responsible for crediting the funds in the UPI request to the recipient's account. Once they have credited the appropriate account, they send a notification to NPCI confirming the successful credit.

Recipient Payment Service Provider (Recipient PSP)

Merchants use a payee payment service provider or payee PSP for P2M (pay to merchant) transactions.

Seamless UPI Transactions with PayU India

UPI is a robust payments infrastructure that has played an important role in simplifying and popularising digital payments. Its simplicity and lack of fuss makes it inclusive and plays an important role in the Government of India's digital drive.

But it's also vital for businesses to work with a UPI partner who can make receiving and paying seamless. At PayU India, we understand your need to build a strong online presence. We offer a no-coding, no-developer, secure solution that seamlessly integrates with your existing payment infrastructure and makes UPI transactions easy. Click here to know more about our services.