Updated: November 26, 2016 
Author's Note:
This is a highly researched article, and once you make it to the end, you will have a crystal clear Idea of what UPI can do and what it can't. So, please read it carefully and here we go.
So, what exactly is UPI?
UPI (short for Unified Payments Interface) in simple words is an online payment system which lets you transfer money to your friend (or anyone) using your smartphone. Now, I know, what you are thinking, one can also transfer funds with the smartphone using online banking and Paytm, right? So, how is UPI different? If you transfer money via online banking (i.e. NEFT or IMPS), you need to know the beneficiary's account number and IFS Code. Not to forget, it also takes some time to add a new beneficiary and transfer funds. Paytm, on the other hand, is simple. Enter the person's mobile number and the funds are transferred instantaneously. No need to wait or enter the complicated account number. But, a big problem with it, the money you received from Paytm goes to your Patym wallet and not your bank account. Yes, you can transfer that money from your Paytm wallet to your bank account, but that takes time, and there is a huge transaction fee (4% normally, but it is at 1% right now). And this is where UPI comes into the picture. With UPI, you can transfer funds by knowing the beneficiary's mobile number or VPA and the amount goes directly from your bank account to your friend's bank account. No third party wallet is involved. Best of both worlds.How UPI works?
Here is how it works, you download the UPI app for App Store > open it > enter the beneficiary's VPA (the Virtual Payment Address, which is like an e-mail address for your bank account)Â > confirm the amount > press send. And that's it. You have successfully transferred the money to that person's bank account. So, you see, to send and receive money via UPI, you don't need additional bank account information like you need to during IMPS, RTGS, etc. UPI can also be used to pay merchants who accept UPI as a payment mode, just like you can with mobile wallets such as Paytm. And yes, UPI is backed by the Indian govt i.e. NPCI (National Payment Corporation of India).What are the advantages of UPI over NEFT, IMPS, and RTGS?
Unlike NEFT and RTGS, UPI is available 24x7. You can transact even on public holidays, or at 3 am when your younger brother asks you for urgent cash. With UPI, you can easily pay to merchants (obviously who accept it) directly from your bank account without inputting your card details, net banking ID/password, etc. There is also no need of adding a beneficiary everytime you want to send money to a new party. All you need is their VPA (which is easy to remember), and you are ready to go.What are the advantages of UPI over mobile wallets like Paytm?
Unlike the online wallets, with UPI, your money is in your bank account. And you get the interest for that as long it's there, which is not the case with the online wallet. UPI also has better security. You don't have to worry about the safety of your UPI account in case it gets hacked since it uses two-factor authentification. So, without your mobile number or MPIN, the data is useless for a hacker. It can not be accessed from any website, like other E-Wallets. Topping up your UPI wallet is also not a hassle as it's directly linked to your bank account, and all the funds are always available. Also, there is no monthly limit for transactions which is set to ₹20,000 for wallets such as Paytm (KYC increases this limit).Can any Bank's UPI app be downloaded for use?
Yes. There are a lot of apps for UPI access, and any one of them can be used to transact using UPI. For example, you can use ICICI Bank's app 'Pockets' to transact using your SBI account. A few of the apps from the popular banks are: ICICI - Pockets HDFC - HDFC Bank MobileBanking SBI - SBI Pay Axis Bank - Axis Pay Note: Make sure you update your app from the Play Store.How do I get started with using UPI?
There are a few requirements for using UPI such as - 1. Android smartphone with active Internet connection. 2. A Debit card relating to this bank account 3. A mobile number linked to the aforementioned bank account. One SMS will be sent from your mobile number, so make sure you have sufficient balance. Note: None of the UPI apps work on rooted Android phones for security reasons. Once you have all these requirements fulfilled, you are good to go. Firstly you have to create your unique VPA (Virtual Payment Address). For this instance, we'll see how to create a VPA on ICICI Pockets app (ICICI bank's mobile app) using an SBI account. But the steps should be similar for other banking apps as well. Step 1: Open ICICI Pockets. The first time you open the app, you will be required to set an MPIN. Also, an SMS will be sent from your mobile number for verification.
Step 2: Click on 'Continue' to create a unique Virtual Payment Address (VPA).
Step 3: Choose a VPA and check if it's available.
Step 4: Select your Bank from the list.
Step 5: Then register that bank account using your debit/credit card information.
Step 6: Choose your default account for transactions.
Step 8: After submitting, you'll be all done - and can now begin transacting using UPI.
