Friday, December 2, 2016

UPI - The next gen Payment system

There's been a lot of excitement about new UPI-enabled apps such like Axis Bank’s Axis Pay, ICICI's Pockets, and Flipkarts PhonePe, but what do these apps do?  In really simple terms, the UPI (Unified Payments Interface) is a payments system - just like a cheque, your debit card, or a mobile wallet.

The UPI, which went live in Septembet this year is interoperable between banks, so it doesn't matter if you have an account with Axis Bank or ICICI Bank or Yes Bank - and that's thanks to the NPCI (National Payments Corporation of India), which is the same organisation that enables our ATMs to be interoperable, allowing you to use an Axis ATM card in an ICICI ATM, for example. The UPI has gone live with most of the private sector bank and PSU banks. We can expect almost all banks to be on live by March'2017.

What is UPI?

It's a payments system. You could use UPI to transfer money between friends and family or to pay your landlord, or to make a payment at a shop, or to buy something online. The money will be debited from your bank account, and transferred to the recipients account instantly and securely.

It's based on the IMPS (Immediate Payment Service) system that you might have used with your netbanking app by now, and its available 24x7, even on Sundays and holidays.

What is Virtual Payment Address 

"Virtual Payment Address" is an identifier (that takes a form of abc@abcbank wherein "abc" is a unique name that you can choose for yourself) that can be uniquely mapped to an individual account using a translation service. Like I have my virtual address as rajtalati@icici. It requires seconds to generate VPA through bank's mobile app or throu' internet banking

How is it different from NEFT, RTGS, IMPS?

NEFT and RTGS both involve a pretty significant delay, so you don't need to bother about that. UPI is based on IMPS, so in a basic sense, there's no big difference. UPI is basically IMPS designed for a mobile world - it's much more convenient to use, and easier to set up. What does that mean? Well, let's say that you want to transfer money right now - maybe your friends just got married and you want to send them some cash as a gift they can use in any way they want. Or you need to send money for any other reason.

Right now, using IMPS, you'll have to go to your bank's app - no using third-party apps for this - and go to the funds transfer section. Then you'll have to add a recipient; you have to authorise a recipient before you can send them money, and then until you manually remove them, you're stuck with them in the recipients list where you could accidentally select them at any time. Adding a recipient means entering a lot of details about them as well - you need to know their bank account number, and IFSC code (and depending on the bank app you're using, also their bank branch), which are all long strings of numbers. It's confusing and painstaking.

With UPI, just open a UPI app that's linked to your account, enter the payee ID (which is something simple and memorable like rajtalati@icici), the amount, and click transfer.

How do I get started with UPI?

It's really simple - all you have to do is download one of the banking apps from the Google Play store that supports the UPI. The small list of banks is here: Andhra Bank, Axis Bank, Bank of Maharashtra, Bhartiya Mahila Bank, Canara Bank, Catholic Syrian Bank, DCB Bank, Federal Bank, ICICI Bank, TJSB Sahakari Bank, Oriental Bank of Commerce, Karnataka Bank, UCO Bank, Union Bank of India, United Bank of India, Punjab National Bank, South Indian Bank, Vijaya Bank and YES Bank.

Once you download the app, you need to verify your phone number, and then link your bank account to the app. Once you've confirmed your bank details, you're good to go and can start using the app to send or receive money.

Do I have to have a bank account to use this?

Yes. The UPI app has to be linked to a bank account to send or receive money.

Do I have to have an ICICI account to use Pockets or a Yes Bank account to use PhonePe? i.e their UPI apps.

No. This is one of the big plus points of the UPI - it's interoperable between banks, so you don't need to have a different app for every account you use. So with one app of anyone bank can link your accounts with that bank or any other banks.If you link more then 1 account then need to mark a default bank for receiving payment and default bank for sending payment. You can change default bank anytime you wish to.

How can I receive money

Login to Mobile app and click on UPI.
Click on UPI and then choose "Collect via UPI"
Enter the details of the transaction such as the VPA of the person you would like to collect from, amount and remarks.You can also choose if you would like to receive the money immediately or in the next 7 days. Click on Submit
Please review the next screen carefully to ensure you have filled all details correctly.
Click on Submit to initiate a Collect payment via UPI. When the person you have requested money from authorises the transaction and money is credited into your account, you will be notified.

Amount Restriction :

Currently per transaction restriction is Rs.100000 per transaction.

What if I loose my mobile : 

UPI is adhered to two factor guidelines of RBI or your mobile app pin and UPI pin.


At present there is no seperate charges for UPI .Only Rs.5.00 +S.Tax is debited to you account towards IMPS charge which anyways you pay for netbanking.

Why is this better than using a wallet?

One question that comes up a lot is whether UPI is like a mobile wallet, and whether the UPI is going to remove the need for mobile wallets. No,I Don't think so. We have a big market and both of them can survive together.

Rather wallet has already grabbed a space in people's mind now it's UPI's turn and will depend on how much bank pushes it by way of advertisement and creating awareness within their client base. One thing is very sure it will give tough competition to wallets in future.


  1. Excellent Article Mr Talati

    This is very much need of hour. You have explained the points in very simple and useful language. Please note following points.

    - Have you yourself used this mode of transfer?
    - Can we add current account, OD account also or it will work only for saving account?
    - Will we need to go to bank for first time verification or linking account?
    - How much is charge, if my bank charges nothing to me for IMPS, does it mean that it is free for me?

    - As on 3 Dec'16, State Bank of India, HDFC and Kotak Mahindra Bank are also member of UPI.

    Thanks once again.


  2. Dear Bhagyesh,

    Thanks for appreciation

    Replies to your query
    1) I do have created my own VPA i.e.rajtalati@icici but have not yet made or received any payment through it.On a lighter note we can try it if you send me some money.
    2) Current account - Yes, O.D. - Please check with the bank, If O.D. requires bank permission or monitoring then they might not allow.
    3) No need to go to bank. You can do it in few seconds by bank's mobile app.
    4) Like I mentioned charge is Rs5.00 + but it might vary from bank to bank. If your bank is not charging you for IMPS then this service should also come free to you. Please do check with bank once.

    Suggestions - Very true and I think post demonetisation almost all of the bank will be UPI enabled by this fortnight.

    Thanks, hope your queries are answered.

  3. Thanks for giving such a nice information.i would like to know more about Upi Payment .