UPI or Unified Payments Interface is an online payment system that can be used to pay the money directly from the bank account with the assistance of a smartphone. By UPI you can transfer money without any IFSC code and beneficiary’s account number. UPI was launched in December 2016 as an advanced version of IMPS(Instant Money Payment Service). It was launched by NPCI ( National Payments Corporation of India).

NPCI has created a major role in all retail payments system. It was set up by RBI and IBA in April 2009 as per the provisions of the Companies Act. It also launched IMPS and RuPay Card.

Features of UPI

  • It enables the user to transfer the money from one account to another anytime and anywhere.
  • A virtual address keeps the user’s personal data and credentials secure.
  • No more visiting banks or ATM.
  • It makes life easier with an easy digitized payment option.
  • Merchant payment easy through a single application or in-app payment feature.
  • Fast counter payments through bar code scan.
  • Offline transactions are also available.

Procedure of UPI


Active Bank Account

The mobile number has to be linked with bank account

Smartphone with an Internet facility

Debit card to set MPIN

Activating the UPI

  • Download the UPI app.
  • Register on the application with your correct account details.
  • Create a virtual ID.
  • Set the MPIN.
  • The account gets activated within 5 minutes.


  • Smartphone with an internet connection.
  • UPI application like Google-Pay, Paytm, etc
  • Use registered MPIN.

Working of UPI

  • An NPCI repository is used.
  • Repository stores credentials about payer and payee.
  • Feed payment instructions ( Mobile nos and Aadhar nos)
  • Do switching, clearing, and settlement of transactions.
  • The transaction information is sent to NPCI and then it proceeds for further process.
  • To identify the details of the second party involved, it either uses its repository or contacts the second party PSP.
  • Once both PSP’s information is available to NPCI, it proceeds with debit and credit processes.
  • On successful completion, the payer and payee’s PSP’s are notified, which then notify their customers i.e. payer and payee.


  • Sending money to relatives.
  • Sending money to a friend or collecting from him.
  • Buying on an e-commerce site.
  • Buying railway ticket on IRCTC application.
  • Using taxi services.
  • Paying various bills.

Advantages of UPI

  • A trusted common library for credentials is provided by NPCI.
  • Two-factor authentication is used.
  • Cheap and simple to use.
  • The pay limit is greater than other wallets.
  • End user friendly.

Also Read– Why You Need A Budget?

Disadvantages of UPI

  • Cybersecurity
  • Clickbait
  • Unsafe if personal information shared with others.
  • The requirement of the internet and smartphone.
  • Server breakdown or the crash of UPI application

In future years UPI can replace NEFT, IMPS, and RTGS as UPI has only 1 unique ID of the recipient and is required for an instantaneous transfer of funds. It is much easier than the other modes of transfer. In the future, it is expected to replace the other modes of payments as it makes payments very easily and it can be done instantly at any point in time.


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