• Unified Payments Interface, commonly referred to as UPI, is an Indian instant payment system developed by the National Payments Corporation of India (NPCI) in 2016, and regulated by the Reserve Bank of India (RBI).
  • The interface facilitates inter-bank peer-to-peer and person-to-merchant transactions.
  • UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
  • UPI is currently the biggest among the National Payments Corporation of India (NPCI) operated systems including National Automated Clearing House (NACH), Immediate Payment Service (IMPS), Aadhaar enabled Payment System (AePS), Bharat Bill Payment System (BBPS), RuPay etc.
  • It runs as an open source application programming interface (API) on top of the Immediate Payment Service (IMPS), and is regulated by the Reserve Bank of India (RBI).
  • The top UPI apps today include PhonePe, Paytm, Google Pay, Amazon Pay and BHIM, the latter being the Government offering.

Features of UPI

  • Unlike traditional methods, UPI simplifies transfers using the recipient’s UPI ID, be it a mobile number, QR code, or Virtual Payment Address, eliminating account numbers.
  • It eliminates the need to enter bank details or other sensitive information each time a customer initiates a transaction.
  • consistent UPI transaction PIN across apps enhances cross-operability, enabling 24/7 transactions.
  • UPI operates as a digital public infrastructure, allowing seamless interactions for all players, including merchants and customers, without transaction costs.
  • UPI uses technologies like the Immediate Payment Service (IMPS) and the Aadhaar-Enabled Payment System (AEPS) to ensure that payments between accounts go smoothly. 
  • It facilitates push (pay) and pull (receive) transactions and even works for over-the-counter or barcode payments, as well as for multiple recurring payments such as utility bills, school fees, and other subscriptions.
  • It also works with “Peer-to-Peer” requests, which can be scheduled and paid for based on need and convenience.
Features and benefits of UPI

How is it unique?

  • Immediate money transfer through mobile device round the clock 24*7 and 365 days.
  • Single mobile application for accessing different bank accounts.
  • Single Click 2 Factor Authentication – Aligned with the Regulatory guidelines, yet provides for a very strong feature of seamless single click payment.
  • Virtual address of the customer for Pull & Push provides for incremental security with the customer not required to enter the details such as Card no, Account number; IFSC etc.
  • QR Code
  • Best answer to Cash on Delivery hassle, running to an ATM or rendering exact amount.
  • Merchant Payment with Single Application or In-App Payments.
  • Utility Bill Payments, Over the Counter Payments, QR Code (Scan and Pay) based payments.
  • Donations, Collections, Disbursements Scalable.
  • Raising Complaint from Mobile App directly.

Participants in UPI

  • Payer PSP
  • Payee PSP
  • Remitter Bank
  • Beneficiary Bank
  • NPCI
  • Bank Account holders
  • Merchants

National Payments Corporation of India (NPCI)

  • NPCI is an umbrella organisation for operating retail payments and settlement systems in India.
  • It is an initiative of the RBI and the Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, to create a robust Payment & Settlement Infrastructure in India.
  • The ten main promoter banks of NPCI are Punjab National Bank, State Bank of India, Canara Bank, Union Bank of India, Bank of Baroda, ICICI Bank Limited, Bank of India, HSBC, Citibank, and HDFC Bank Limited.
  • It has been incorporated as a Not-for-Profit Company with an intention to provide infrastructure to the entire banking system in India for physical as well as electronic payment and settlement systems.
  • NPCI is focused on bringing innovations to retail payment systems through the use of technology to achieve greater efficiency in operations and widen the reach of payment.
  • The regulatory board of the NPCI, headquartered in Mumbai, includes nominees from the RBI along with nominees from ten core promoter banks.

Immediate Payment Service (IMPS)

  • Immediate Payment Service (IMPS) is a mode of money transfer from one bank account to another in the Indian banking system.
  • The system enabled 24x7x365 real-time, interbank, electronic money transfers when there was only NEFT and RTGS facilities available in India.
  • Citizens could access the facility through multiple channels, such as mobile phone, ATM, the internet, and SMS.

BHIM vs UPI: Key difference 

  • Unified Payments Interface (UPI) is a real-time payment system through which money can be transferred from one bank to another. Whereas BHIM (Bharat Interface for Money) is the mobile application through which the money transfer takes place.
    • UPI is a platform whereas BHIM is a separate mobile wallet app like Paytm, PhonePe, etc.
  • Development and purpose: BHIM is developed to be a standalone app, whereas UPI is the backbone that powers BHIM and several other apps to process transactions instantaneously.
  • Interface and experience: BHIM is designed to be simple and user-friendly such that users can carry out transactions easily. Whereas UPI works across a range of payment apps wit unique interfaces.
  • Supported transactions: Both UPI and BHIM offer seamless transactions, but BHIM is primarily focused on person-to-person transactions, whereas UPI caters across a wide range of payments including merchant transactions and bill payments.
  • Language support: BHIM supports multiple languages catering to diverse user base across the country whereas UPI supports languages depending on the respective app.


  • UPI 123Pay is a Suite of solutions developed for Non Smart phone / feature phone users to use the UPI without internet connectivity.
  • It will work on simple phones that do not have an internet connection. As of now, the UPI features are mostly available only on smartphones.
  • The UPI service for feature phones will leverage the RBI’s regulatory Sandbox on Retail Payments.
    • A regulatory sandbox usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain regulatory relaxations for the limited purpose of the testing.
  • The UPI service will enable digital transactions through a mechanism of ‘on-device’ wallet in UPI applications.”
  • The users will be able to undertake a host of transactions based on four technology alternatives including– IVR (interactive voice response) number, missed call-based approach, app functionality in feature phones and proximity sound-based payments.
  • While registration of your account with UPI 123PAY, you have to setup a 4-6 digit UPI PIN. Customer have to enter UPI PIN every time he makes the transactions.
  • Benefits:
    • The new service for feature phones will enable individuals to make direct payments to others without smartphones and internet.
    • Users can initiate payments to friends and family, pay utility bills, recharge the FAST Tags of their vehicles, pay mobile bills and also allow users to check account balances.
    • It will allow customers to use feature phones for almost all transactions except scan and pay.
    • UPI123Pay will benefit an estimated 40 crore feature phone users and enable them to undertake digital payments in a secure manner. This will bring non-smartphone users under the digital payment system.

UPI Goes Global

  • France, UAE, Mauritius, Sri Lanka, Singapore, Bhutan, and Nepal are the countries that accept UPI payments, according to the government.
  • Bhutan was one of the first countries to adopt UPI payments outside India back in 2021 in collaboration with the Royal Monetary Authority (RMA) of Bhutan.
    • Besides, Bhutan is also one of the first countries to adopt and issue RuPay bank cards.
  • France is one of the first countries in the Europian region to access UPI payments, that too at the iconic Eiffel Tower in collaboration with Lyra.
UPI Goes Global
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