The next time you walk down to your grocer’s shop and see that ubiquitous banner of Paytm, Phone Pe or Google Pay in that shop, remember there is a UPI interface that works behind these applications. Thanks to UPI, transferring money and making payments is almost like a breeze. UPI defines each linked account with a unique code which is akin to an email id; abc@icicibank or xyz@hdfcbank or mno@rbl etc. All that you need to remember is this id and you can transfer funds without any hassles to any account that is or is not UPI enabled. Let us look at some of the major advantages of UPI.
Major advantages of UPI (Unified Payment Interface)
There are some key merits in UPI, which helps it score over other methods like NEFT and IMPS. Here are 8 such benefits of UPI over alternate methods.
- UPI is a lot more economical as it does not attract any charge currently. This has been done with a view to encourage digital transactions in India. On the other you get charged for NEFT transfers if you are not a privilege customer. You get billed a higher amount of up to 2% plus GST for IMPS transactions. If you use a payment gateway, charges can be still higher and go up to 4-5%. UPI is free of any cost. Of course, at a future date, UPI could entail a cost but it would still be lower than other methods.
- UPI can be even used for small transactions. For example, with UPI you can pay the grocer or the electrician, something that was not possible with NEFT/IMPS. In the absence of transaction costs, even small traders have adopted this system. What is more, you avoid visiting the ATM, handling cash or managing small change. Credits and debits are instantaneous. Transfers are also safe since the actual bank account details or debit card details are never disclosed during transmission. The UPI system uses the VPA or the UPI id (a virtual code) and that makes transfers safer.
- UPI has a process flow that is smarter even at retail outlets. Unlike in a typical POS machine at a retail outlet, you don’t enter the 4-digit PIN in the presence of everyone. Also, since there is no card insertion, the chances of card-related frauds are much lower.
- Transfer of funds under UPI is instantaneous. This is unlike NEFT / RTGS, wherein it takes up to 2-3 hours for the credit to reflect in the bank account. In case of UPI, the mobile confirmations are received by both the parties immediately even if the amount involved is very small. Even transfers from an UPI account to a bank account are instantaneous.
- UPI allows you to access multiple bank accounts via a single UPI interface. For example, you can map your ICICI, HDFC and Axis accounts to Phone Pe and each time you pay, Phone Pe gives you a choice of which account you want to debit. You are saved the task of remembering NEFT access passwords for multiple bank accounts and handling multiple interfaces. You can centralize bank account access through a single UPI.
- One of the big advantages of the UPI interface is that it actually works as an interactive money transfer mechanism. For example, you can pay to vendors or friends but you can also receive money from clients and partners. It is simple. You just send a UPI request and the relevant link is emailed to the other party with an SMS link. All that the other person has to do is to click and approve and the payment comes into your bank account. This is again a facility that traders and businessmen are using extensively.
- Unlike a typical mobile wallet, you don’t have to deposit money and lose interest in UPI transactions. The money remains in your bank and when the payment has to be made, the bank accounts get debited. You save on interest loss and avoid the hassles of having to load money in multiple wallets.
- If you use any of these UPI based apps like Google Pay or Paytm or even Phone Pe, you would have been surely spoilt with shopping offers, discounts and cash backs. It is hard to say how long this will last, but you can as well make the best of these benefits while they last. Quite often, these benefits are significant.
- UPI payment method has come as a boon to Investors and traders in stocks and other financial assets. Using UPI, investors and traders can make payments quickly and conveniently to fund their trading account. The instant transfer of funds enables traders to grab the opportunities in the market that comes up during trading hours.
UPI was recently permitted in India and has picked up rapidly. However, the system is still to be tested under stress conditions. For now, it is a great product for small payments and for creating two-way transactional payment and receipt interfaces. Of course, enjoy the cash backs and coupons while they last!