What is UPI Payment: How it works, How to use, Transaction charges

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What Is UPI/UPI payment?

Unified Payment Interface or UPI is an online real-time payment system. UPI is a project developed by the National Payments Council of India (NPCI) and regulated by the RBI. Users can link multiple bank accounts in a single app and transfer funds without an account number or IFSC code.  Users can also accept payment requests over the UPI app.

How Does UPI Work?

UPI gives users a Virtual Payment Address (VPA). This VPA is used to transfer funds or accept payments. UPI is compatible with banks, applications, digital wallets, etc. and is becoming the core application used for digital transactions in India. Several applications have already embedded UPI in their applications such as Bhim, Google Tez, Paytm, ICICI net banking, etc.

One can use UPI for the following:

  • Quick transfer of funds and remittances
  • Payment of bills and dues such as utility bills, gas, etc.
  • Making merchant transactions to third-parties such as ola, movie tickets, shopping, etc.  

How To Use UPI?

To use UPI, you need to:

  1. Download the UPI app from the play store, IOS store or a banks app.
  2. After downloading the app, proceed to create an account and register your name, account details, a virtual payment address and a password.
  3. You can now add your bank account details (multiple accounts) and link the same to the virtual address ID.
  4. Now, to send money, you need to use an M-PIN. Select the bank account to transfer funds from and select generate M-PIN. You will receive an OTP on your registered mobile number.
  5. Next, enter the last 6 digits of your debit card number and expiry. You will be able to set your new M-PIN and make payments successfully.

UPI Charges and Transaction Charges

  • An individual cannot transact more than INR 1,00,000 in a single UPI transaction.
  • Banks do not charge a transaction fee yet. Different banks propose charging different transaction fees or rates (around INR 0.50/transaction).
  • Businesses have to pay a certain percentage of fees for UPI receipts or payments.

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