UPI – How does UPI work & Advantages?

UPI means Unified Payment Interface. UPI is the online payment method that belongs to India, and it came into existence in April 2016. UPI provides quick and real-time transactions to its users. UPI offers to transfer funds through the bank account via a verified application on mobile platforms.

UPI was developed by NPCI (National Payments Corporation of India). UPI involves a person to the merchant and peer-to-peer transactions. The regulations and control of UPI are made under the Reserve Bank of India.


  • The official website of UPI is www.npci.org.in.
  • Many countries use the services of UPI. Such as Malaysia, Singapore, Bhutan, UAE, Nepal, and India.
  • According to the records, UPI payments are supported by 304 banks. The monthly transactions done by UPI are more than 4.5 billion.

Features of UPI

  • With UPI application single user can access all its bank accounts.
  • UPI transactions are available 24*7. UPI transactions can be done on any day, including the bank holidays.
  • UPI helps people to go cashless and limit the use of ATMs.
  • UPI application comes with message alerts and transaction history, which can be shared with the other party if there is any confusion related to the transaction.
  • UPI payment can be made by any application which supports UPI, such as gpay, Paytm, and phone pay.
  • UPI makes sure that the money of the user remains safe. If the transaction fails due to any technical issue, the debited money gets credited to the user account within one business day.
  • UPI application offers various rewards and other benefits.
  • Getting and making payments for donations is very easy. All you need is to share your UPI Id with the person you seek money from.
  • NPCI launched UPI 2.0 in august 2018. UPI 2.0 is projected as more secure and reliable and has more features than the UPI earlier version.
  • UPI is a significant step forward toward the cashless economy in India. Several new features are added to UPI to make it more convenient for its users, such as virtual debit cards, two-way verification, etc.
  • UPI helps connect the bank account with the UPI available for smartphone users and pay or receive money with one click. UPI payments don’t need bank account details every time you make the payment, and only a UPI pin is enough to do the transaction.
  • The payments by UPI are fast, and the funds get transferred within seconds. The receiver and sender both get the message alert about the transfer of the funds.

Working of UPI:

UPI is a secure online payment method that is regulated by RBI. This payment method is fastly growing and becoming the choice of many users for online transactions. To make payments with UPI, users need

  • A bank account (Bank must be enlisted with UPI)
  • A smartphone (android or iPhone)
  • Good internet connection
  • The mobile number which is linked with the bank account

Registration Process for UPI:

  • Download the UPI application on your smartphone from the play store.
  • Once the app is downloaded, then click on the sign-up icon.
  • Fill in the details like name, address, and bank account.
  • Select the bank from the list from which you want to do the transactions.
  • Once the details are filled in, you will get the OTP from your given bank, which you need to fill in the UPI app. The OTP will come in the KYC (know your customer) linked mobile number.
  • Further, you will be asked to fill in your debit card details, such as your debit card number and its expiry date.
  • You will be asked to enter the OTP and then the UPI pin of your choice.
  • Click on the submit button. Once all the details are submitted, you will get a notification about your successful registration in the UPI app. You can initiate the transaction with the UPI pin you submitted.

Advantages of UPI:

  • With UPI, dozens of transactions can happen with one click and without the hassle of keeping cash or going anywhere.
  • UPI offers two-way authentication, and payment can be made with one click.
  • UPI is a safe, secure, and easy way of transferring and receiving money online.
  • With UPI payments, the customers can go for cashless shopping and easily track their transactions’ details.
  • Online shopping and e-commerce payments can be made fast with UPI.
  • Credit cards/debit cards and cash is not necessary to carry when the user is having an active UPI account on their smartphone.
  • UPI facilitates access to different bank accounts of a single user through one application.
  • UPI transactions can be done 24/7. There is no unavailability of the UPI app unless of technical issues or poor internet connectivity.
  • UPI provides a virtual ID to the user which is secure and used for UPI transactions.
  • If the user finds any irregularity or trouble using the UPI application, they can raise the complaint online in the customer care service of the UPI application.

Frequently Asked Questions

1. Does UPI charge anything from its users for transactions?

Earlier, there was 50 paisa per transaction charged by users of UPI. But later on, to promote the cashless payments Government of India made the payment charge free of cost. It benefited both as people started using UPI payments more frequently, and the government’s aim for a cashless economy is also fulfilling.

2. Which cashless payment method is better, UPI or credit/debit card?

If the user prefers a cashless payment method, he must go for UPI. There is no need to carry credit/debit cards with UPI, and only smartphones can solve payment-related purposes.

3. Are UPI transactions secured?

RBI regulates UPI application, so it is kept the most secure transaction method, which can be used for big or small payments. The application is very highly encrypted. The UPI pin is 4-6 digits that must be submitted in every transaction. As per the guidelines of RBI, one must not share a UPI pin with anyone.

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