What is UPI and how does it work?

Unified Payments Interface or UPI is one of the most popular payment systems in the country. It accounts for a major part of online transactions in India. Apart from banking apps, there are several popular third-party apps like PhonePe, Google Pay, Paytm and Amazon that support UPI payments.

Nirmala Sitharaman, the Finance Minister on Saturday $4 that Merchant Discount Rate (MDR) charges will be waived off for UPI and RuPay transactions starting from January 1.

Razorpay, a Bengaluru-based payment gateway reported that in $4, UPI accounted for 50.49% of transactions on its platform.

What is UPI?

Unified Payments Interface or UPI is an immediate real-time payment system developed by the National Payments Corporation of India (NCPI). It was introduced in April 2016 as a pilot project and is regulated by the Reserve Bank of India (RBI).

Soon after it was launched, banks announced their own UPI apps. It also paved the way for third-party apps such as PhonePe and Google Pay (earlier Google Tez).

Within three weeks of the launch of its UPI app, ICICI bank $4 that its app had crossed 1 lakh downloads. According to $4, Google Pay and PhonePe ruled the roost with 36% market share each, while Paytm has 16% market share. This year, $4 100 million downloads, registering a growth of 50% as compared to last year.

UPI 2.0 announced with enhanced features

Two years after the launch of UPI, the NPCI announced $4, a revamped version of UPI with several new features.

The main highlight of UPI 2.0 is that it increased the per transaction cap to ₹2 lakh and the ability to link overdraft accounts. Earlier, users could only link their savings and current accounts to UPI.

UPI 2.0 also has features like one-time mandate that allows users to pre-authorize a transaction, Invoice-in-inbox which allows users to verify the invoice before making a payment and more.

These mandates are useful for buying into IPOs (Initial Public Offering), make recurring bill payments and more.

How does UPI work?

UPI is simple, free and it works 24x7.

Users can send money by scanning QR codes or entering the UPI ID. Apps like Google Pay and PhonePe simplify this process further and allow you to simply enter the phone number of the recipient. It means you don’t have to enter the recipient’s account number, bank name and IFSC code while making a payment.

How to pay using UPI?

UPI is also accepted as a payment mode on several popular platforms like Flipkart, Amazon, Paytm and more. To make a payment, all you have to do is follow these simple steps:

• In the checkout section, select UPI as the mode of payment.
  
• Now, select the UPI app or enter your UPI ID, and a collect request will be sent to your phone.
  
• Tap on the collect request – this will open the UPI app which you had selected.
  
• Click on Accept and enter your UPI PIN.
  

Your payment should be complete after successful authentication.

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