What is UPI and how does it work?

UPI is a single platform that merges various banking services and features under one umbrella. It allows the transfer of money from one bank account to another instantly via one’s mobile phone. Payments can be made via an app on a mobile device only. The money transfer via UPI works on a 24×7 basis.

To use UPI, an individual must have an account with a bank that allows using UPI facility. Click here to know if your existing bank allows UPI facility. If your bank allows UPI payments, you need to download the UPI supporting app on your smartphone. Some of the commonly used apps offering payment via UPI method are PhonePe, Google Pay, Paytm, Amazon Pay, WhatsApp Pay, BHIM amongst others.

Setting up:

Once you have chosen which UPI platform to use, you need to do the following:

Step 1: Download and install a UPI app on your mobile

Step 2: Launch the app and register yourself

First, verify your number. UPI system populates your bank account details and authenticates using phone number linked with your bank account. So, install on phone with the number linked to your bank account only. After the number is verified, provide some basic details like Name and Email, and set a 4-digit password (Pin). If you ever forget your Pin, which you need for logging into the UPI app every time you use it, you’ll need access to your email to recover it.

Step 3: Add a virtual password address aka UPI Username

Just like your email, your UPI virtual password address (VPA) is your UPI ID which others will use to send you money.

Step 4: Add a bank account

Select and link your bank account. Set your UPI PIN by providing the last six digits and expiry date of your debit card.

UPI has made the money transfer process a lot easier. You do not have to remember the receiver’s account number, account type, IFSC, and bank name. Instead, you can do the money transfer only by knowing their Aadhaar number, mobile phone number registered with the bank account, or UPI ID. You can set up UPI ID on one of the apps that support UPI service.

Maximum limit on the transfer of money

At present, the upper limit per UPI transaction is Rs 1 lakh per account per day. Within this upper limit, different banks may have their sub-limits hence one should check with the bank.

Is UPI secure?

UPI transactions use highly secure encryption format that is not easy to tamper. It uses a two-factor authentication method, similar to OTP, for verifying every transaction. However, UPI PIN will be used in the place of OTP for validation.