UPI or Unified Payments Interface is a new method for money transfer between two bank accounts. Almost all major banks have enabled UPI and many businesses accept payments using UPI.
So, what is UPI?
UPI is a new system for mobile-first payment mode for making payments from your bank account to individuals or businesses. In this process, the money is directly deducted from your bank account and credited to to beneficiary account instantly. There is a virtual address that’s easy to use, eliminating the need to add long bank account numbers and IFSC for bank money transfers.
UPI is just a more fast, simplified and standardized version of existing bank transfer methods such as NEFT/RTGS/IMPS. The process is same across all Indian banks, which allows bank account transfers from anywhere with a few clicks.
UPI uses the concept of “Virtual Payment Address” (which looks like ‘yourname@bankname’). So, you only share this address, which can be changed anytime. When using UPI, no one gets to see your bank account number.
Currently, UPI allows all banks to be registered as Payment Service Providers, but other entities such as mobile wallets can also be included in the future.
How it works for merchant/online transactions?
When a business accepts UPI payments, it will send you a collect payment request to the customer on their Virtual Payment Address (VPA). You will get a mobile notification in your bank UPI app. When you accept the request, the money is transferred and the payment is complete.
UPI does not use any OTP (One Time Password). Instead, it relies on MPIN (mobile banking PIN) instead of a One Time Password. If you have mobile banking activated on your bank account, you already have the MPIN required. Else, generate a new MPIN.
How does the UPI payments show in your bank account statement? Any transaction done via UPI is basically an IMPS payment transfer. So, it will show up as an IMPS bank transfer to the merchant bank account or to the person you sent the money.