UPI (Unified Payments Interface) is a common acronym that has become a part of our vocabulary. If you live in India, you very quickly adapted to using UPI for paying electricity bills to buying daily groceries at a Kirana store. India’s digital revolution charted a staggering growth with introduction of UPI.

While most of the western countries are limited by their card-based infrastructure, India blazed ahead to revolutionize the digital payment system. According to a report by ACI Worldwide, the real-time transactions in India has skyrocketed to a whopping 48.6 billion, making it the global leader in this digital payment ecosystem. Let’s understand UPI and how it works.

UPI – Unified Payments Interface the real-time payment system, is a mobile application that allows users to transfer money between bank accounts. It is a single-window mobile payment system with two-click factor authentication process developed by the National Payments Corporation of India (NPCI). The interface is regulated by the Reserve Bank of India (RBI), India's central bank.

The instant money transfer only needs 2 things – A smartphone & Bank account. User/Merchant can set up a UPI ID in any one of the Payer app / PSP (Payment Service Provider) like GPay, Amazon Pay, PhonePe, etc. Once generated, the unique ID can be used on any number of platforms accepting UPI payments with a simple 2 step verification process.

UPI offers unparalleled speed, ease and connect. Wondering how the money switches accounts on the back end? Here is your non-technical answer, when the user makes a payment to another user/merchant using their mobile number or UPI ID or QR code, the money is transferred from sender’s bank to the Payment App’s current account and then, to the recipient bank.

There are several ways to process instant money transfer, how is UPI any different? Why is it advantageous to use UPI as a mode of payment? how secure is the transaction? You will know it by the end of the blog. Keep reading!

We avail internet banking services when starting a new account with a bank. Most banks offer IMPS (Immediate Payment Service) that enable us to make instant payments. So, wondering how it is any different to use UPI?

Well, for a start, you don’t need to enter your bank details and the recipient bank details to process a payment. With UPI, it is nothing more than a simple click & send. Moreover, it is free. No transaction charges applied. But is it secure? Well, let us explain a little more.

1. UPI is aligned with the regulatory guidelines of the RBI and ensures two-fold security for every payment.
2. The single-click 2 factor authentication required to process your UPI transaction is a security
   system that requires two distinct forms of identification to ensure your transaction is safe.
3. The virtual address of the user required for 2 factor authentication provides incremental security.
   The user is not required to enter details such as Account number or Debit/Credit Card
   details anywhere during the entire transaction process.
4. The UPI ID is created by the user and is not assigned by another entity. So, it does not involve a series of
   numbers that needs to be cross checked manually to ensure you are paying the correct
   account number/person. Easy to remember and easy to use.
5. Verification process is simple and yet ensures a secure transaction by minimizing the possibility of manual error.

UPI, the new-age innovation, and a crowning achievement of India’s FinTech sector is undeniably on a winning streak. The single-click seamless payment system is building a new financial ecosystem with cross-border QR code payments, cardless cash withdrawal and more. The only challenge ahead for UPI is building scalable infrastructure with the volume explosion that is bound to happen in the time ahead and extensive fraud prevention robust and intuitive enough to mitigate threats.

According to Statista, the total value of UPI transaction in India reached over 41 trillion Indian rupees. The transaction value will reach an estimate of over 327 trillion Indian rupees in financial year 2026. UPI is more than just a payment mode as it has brought previously under banked and unorganized sectors into its fold and created a flywheel effect leading to rapid advancement in finance, banking and technology fueling the progress of India, as a nation.