UPI: The Future of Digital Payments

In the last decade, we’ve all moved from long queues at the ATM for cash to instant cards or UPI payments. Have you ever wondered if we’d still use cash by 2033?

Most of us are still trying to decode cryptocurrency, the world going cashless still seems like a ‘way into the future’ situation. Doesn’t it?

In FY 22, UPI accounted for 52 percent of the total 8,840 crore financial digital transactions. The total value of these UPI transactions was ₹126 lakh crores.

Like how we upgrade to “smarter” phones every year, we also upgrade how we handle money. Hard cash in the wallet evolved into plastic money like debit/credit cards. Now, it is the era of UPI.

The data below clearly indicates how UPI payments have almost doubled from 2021 to 2022. As mentioned, it’s winning the race against debit or credit cards.

It is important for us to adapt to these evolving times.

In this blog, you’ll learn how to create a UPI account, the steps in a UPI transaction, the advantages of UPI apps, and what the future holds for UPI.

What is UPI?

UPI stands for Unified Payments Interface. It is a digital payment system in India developed by the National Payments Corporation of India (NPCI).

UPI payments allow you and me to make instant transactions, transfer money and pay bills through a mobile app. All this without the need to share bank account details, IFSC codes, or other sensitive information.

UPI payment enables users to send and receive money from their linked bank accounts in real-time through a simple and secure platform. Users can create a UPI virtual payment address (VPA) linked to their bank account, which can be used to make transactions.

UPI enables peer-to-peer transactions, as well as transactions with merchants, bill payments, and mobile, recharges. This means you can directly transfer money to your friend or also instantly pay the shopkeeper after getting groceries.

It is interoperable across different banks. You can also do UPI payments through popular mobile apps such as Google Pay, PhonePe, Paytm, etc.

There are no Sundays off like at a bank or the dreadful “no cash” message like in ATMs. UPI payment can be made 24×7. It is extremely convenient for us as users.

It is a secure and efficient mode of digital payment, making it a popular choice among users in India.

UPI (Unified Payments Interface) has revolutionized the digital payment ecosystem in our country.

To put it in simple words, UPI payments make sending and receiving money easier, quicker, and more secure.

Considering its popularity, UPI has been dubbed the future of digital transactions in India. It has disrupted traditional payment methods and has paved the way for a cashless economy.

How to create a UPI account

To open a UPI account, you can follow these steps:

1. Download a UPI-enabled mobile app from the app store such as BHIM, PhonePe or Google Pay.

2. Register your mobile number with the app.

3. Create a UPI ID or VPA (Virtual Payment Address), which will be used for sending and receiving money.

You can choose a unique name such as your name or mobile number followed by @bankname.

4. Link your bank account with the UPI app by choosing the bank name and account number. You will receive an OTP (One time password) for authentication.

5. Once the bank account is linked, you can set up a UPI PIN for making transactions. This PIN will be required to authorize all transactions.

6. You can now start using your UPI account to send and receive money, pay bills, and make other transactions.

Please note that the steps may vary slightly depending on the UPI app you are using.

Example of a UPI transaction

Suppose you need to pay your friend Akash ₹1000 after splitting a bill. You can use the UPI-enabled mobile app on your phone to initiate a UPI transaction.

Here’s how the transaction will work:

• Open the UPI app on your phone and log in using your UPI ID and PIN.
• Select the “Send Money” option and enter Akash’s UPI ID or mobile number.
• Enter the amount you want to transfer (₹1000 in this case) and a remark,

such as “Dinner at Dhaba Express”

• Confirm the details entered are correct and enter your UPI PIN to authorize the transaction.
• Once the transaction is complete, both you and Akash will receive a confirmation message on your phones indicating that the transaction has been successfully processed.

The transferred amount of ₹1000 will be debited from your linked bank account and credited to Akash’s linked bank account instantly using the UPI platform.

Benefits of UPI

UPI (Unified Payments Interface) has several benefits that make it a convenient and efficient mode of digital payment in India.

Instant money transfer

UPI payments enable instant money transfers from one bank account to another with only a few taps on a phone screen. This makes it a quick and efficient way to transfer money through a mobile app without delays.

Easy to use

UPI payment is very user-friendly. All you need is a smartphone, a bank account, and a UPI ID to get started with UPI payments. All you have to do is follow the steps and viola! you’re acing digital transactions.

Safe and secure

UPI payment requires two-factor authentication, i.e. you need to enter the phone password followed by the UPI PIN, set by you. This makes UPI transactions secure and less prone to fraud.

Interoperability

UPI payments can be used across different banks, making it an interoperable platform. This enables users to transfer money without having to add the beneficiary’s bank details to their account.

Low transaction fees

Many banks and UPI-enabled apps provide free transactions on UPI. This makes it a cost-effective option for people who frequently transfer small amounts of money.

However, merchant transactions where the merchant country is different from the billing country will charge a 1% fee in Google Pay.

Versatility

UPI offers a wide range of services, including mobile recharges, paying bills, booking tickets, and even buying insurance! This makes it a versatile mode of digital payment. It also has fun perks like cashback that are available as scratchcards on the app. You can use them and get free coupons. At times recharge or freecharge is also gifted. The most popular is cashback which sends money directly to your account.

UPI payment has transformed the way people transact and made digital payments more accessible and convenient for people across India. We hope to see how UPI is adopted by rural India as well to make their daily life easier.

Top UPI companies in India

Google Pay

Google Pay is a UPI-enabled mobile payment app that is available on both Android and iOS platforms. It has quickly become one of the most popular UPI payment apps in India since its launch in 2017. As of August 2021, Google Pay has over 100 million monthly active users in India.

PhonePe

PhonePe is another popular UPI-enabled mobile payment app in India. It allows users to send and receive money, pay bills, and make other transactions. PhonePe claims to have over 300 million registered users. Ithas processed more than a billion transactions per month on its platform.

Paytm

Paytm is known for its digital wallet service, but also its UPI payment feature. Paytm has over 350 million registered users and claims to have processed over 1.4 billion transactions in a quarter in 2021.

BHIM

BHIM (Bharat Interface for Money) is a UPI payment app developed by the National Payments Corporation of India (NPCI). BHIM has over 400 million downloads and has processed over 3 billion transactions since its launch in 2016.

Amazon Pay

Amazon Pay is another UPI-enabled mobile payment app that offers users a seamless payment experience. It allows users to send and receive money, pay bills, and make other transactions. It has over 65 million registered users in India.

You must have come how Paytm markets its app through multiple ads on television with the tagline “Paytm karo”. UPI companies in India have experienced significant growth in the past few years, indicating that UPI has gained wider acceptance among users as a preferred mode of payment.

UPI vs. Debit Cards

UPI (Unified Payments Interface) and Debit cards both facilitate digital transactions. Both are revolutionary methods of digital payments that have wide popularity. Here’s how they compare:

Convenience

The major advantage of making a UPI payment is that you do not need to carry a physical card or remember PINs and CVVs. UPI is a more convenient method. Debit cards require you to carry a physical card and enter the correct PIN to complete transactions.

Security

UPI uses a two-factor authentication process (Phone password & UPI PIN), making it more secure and less prone to fraud. On the other hand, debit cards are prone to risks such as skimming, phishing attacks, and counterfeit cards. This puts the user at risk for fraud.

Interoperability

UPI payments are interoperable across different banks, whereas debit cards can only be used to transact with the bank that issued them.

Transaction fees

UPI transactions are free or have minimal fees for most banks and UPI-enabled apps. However, debit cards usually have transaction fees, especially for certain transactions like ATM withdrawals and foreign currency transactions.

Speed

UPI payments facilitate instant transfers between bank accounts, while it takes some time for debit card transactions to be processed.

Transaction limits

UPI payments have varying transaction limits depending on the bank or app. However, Debit card transactions are usually subject to withdrawal and spending limits.

UPI payment is gaining popularity as a cost-effective mode of digital payment than a conventional bank debit card. However, debit cards are still widely used, and it may take some time for UPI to completely replace debit card use.

Future of UPI

UPI has revolutionized the digital payment landscape in India since its launch in 2016. Today, UPI is rapidly gaining popularity as a preferred mode of payment. This stands true for both, individuals and businesses.

Encouraging more transactions

UPI payments have increased almost five-fold in just two years, and are expected to continue growing in the future. More people are switching to UPI-based payments from cash transactions or other traditional methods.

Integration with new technologies

With the Indian government’s push for digital payments and the emergence of new technologies like voice-activated payments, UPI is expected to integrate with new technologies, making payments even more convenient.

Example:

In April 2023, ICICI Bank introduced easy EMI facility for UPI payments made by scanning QR codes. Customers eligible for PayLater, the Bank’s ‘buy now, pay later’ service can avail of the EMI facility in an instant, easy and seamless manner.

ICICI customers can now instantly buy products or services by scanning the required merchant QR code at a store and making payments in EMIs.

Support for small businesses

UPI payment can be especially beneficial for small and medium-sized businesses that do not have access to traditional payment gateways. With UPI, businesses can accept payments easily and efficiently, leading to lower transaction costs.

Security

UPI is highly secure with its two-factor authentication process, and this coupling with its speed and ease of use is expected to drive its growth in the future.

The Way Forward

A significant percentage of people still prefer the old-school method of cash and don’t want to go beyond the debit card. The choice is yours.

Making instant transactions with a simple QR code scan or a few quick taps on your phone has become the new norm.

UPI is expected to continue its upward trajectory, making it a preferred mode of transaction among people and businesses in India.

Now that you know how to create a UPI account you have an easier way to spend as well as manage your spending. It’s the perfect time to start your journey toward financial growth.

Download Vittae today and unlock your financial freedom in just 30 minutes.