The thought process behind “Digital India” is to have a transparent and functional cashless economy. When you first heard of this terminology a few months ago, your immediate response was, “Except for paying the local grocery or vegetable vendors, I have always been into cashless mode for all my transactions. What is so new in this Digital India concept?”
Yes, we had NEFT and IMPS for payment options but UPI is the advanced version of the two and can serve towards complete cashless transactions. UPI, which was launched in January 2016, has changed the way payments are handled.
What is UPI?
UPI or
Unified Payment Interface is an initiative by the NPCI (National Payments Corporation of India) with the support of IBA (Indian Banks Association) and RBI (Reserve Bank of India). It is a unique identifier that the bank uses to make
payments and transfer money using the IMPS (Immediate Payments Service). You can link the UPI with the email address of the recipient, as every registered email ID is assigned to a virtual payment address.
What is the necessity of UPI when we already have IMPS?
UPI helps you to
send and receive money from your smartphone without entering the entire bank details of the recipient. All you need is the recipient’s mobile number, virtual ID or
Aadhar unique identity number.
According to NPCI, more than 29 banks have started this service, all you need to do is - request your bank (if it is UPI-enabled) to connect you to the system.
Why is UPI, the best payment option?
The ex-RBI governor Mr. Raghuram Rajan mentioned UPI as the “WhatsApp of banking”. It is considered to be the best payment option due to the following reasons:
Cheapest way of money transfer
Unlike NEFT and IMPS, which charge a minimum amount of INR 2.5, UPI transaction can be done in 50 paise (minimum).
Bank details of the recipient is not necessary
The primary reason most people avoid online transaction is the security factor, as online payments require your bank details to be entered, which can be susceptible to hacking. When it comes to card transactions, you will need to give the card number, validity date and CVV number, which also can have its own set of fraud and security issues. UPI payments will only need the recipients virtual (and registered) payment address
Single app for different bank accounts
You don’t need multiple UPI apps for multiple bank accounts, just link one UPI app to the various bank accounts you have and make it the default account for the payment.
Holidays or bank strikes or after hours will not affect your UPI payments since it is based on IMPS platform.
Quick registration of Payee
There is no waiting period for UPI, unlike NEFT and IMPS, you can instantly transfer fund to a new payee.
UPI is more secure than any other mode of payment because of its two level authentications with two different PINs.
Though UPI is still not used widely, it is indeed a good step in the right direction to make cashless transactions faster and secure.
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