Simple to use and supported by the government, the Unified Payments Interface (UPI) has become the go-to payment option in the country. RBI governor, Shaktikanta Das underlined the significance of increasing the global footprint of online payment mechanisms like UPI. He said that this can be used to facilitate easier cross-border payments.
In fact, the rising popularity of UPI-based transactions is eating up traditional payment options like debit cards.
How do UPI transactions work?
To leverage UPI-based payment facilities, a user needs to link his bank account to an application that supports UPI payments. For a bank account to be linked to a UPI application, the sim card of the phone number registered with the bank has to be present in that device.
When a user begins a payment, an interface opens that asks for the UPI pin to validate the payment. Payment is thus processed with direct bank involvement. However, many users prefer UPI wallets to UPI.
What is a UPI wallet?
At its onset, the concept of mobile wallets is not very different from that of physical wallets. Like physical wallets, money has to be put into UPI wallets for them to be useful. Unlike a usual UPI transaction, payments made from UPI wallets do not need your bank account. However, not all UPI applications have the facility of UPI wallets. At this point, UPI apps including Paytm, PhonePe, and Amazon Pay offer the feature of a UPI wallet.
Earlier, the UPI wallets could only be used with the QR codes of that specific wallet. However, in its order dated March 31, 2022, RBI mandated the interoperability of QR codes. In other words, now users can transfer money from one wallet (For example, Amazon Pay) to somebody using a different wallet (Paytm).
By taking the bank account out of the equation, UPI wallets ensure a smooth transaction experience. It does not need you to enter your UPI-Pin as well.
Advantages of Using a UPI Wallet
Industry experts say that every time users scan a QR code or send money using a phone number, they are exposing their data online. To use UPI for small-value transactions is not the smartest thing to do since bank-to-bank UPI transfer means accessing your primary savings account.
Given the large number of transactions one may perform using UPI, UPI wallets may be a better option.
Additionally, to transfer money using UPI, one needs to have money in their bank account and can not rely on credit. However, UPI wallets allow users to top-up using their credit cards, thus providing more flexibility to users.
Are there any additional charges to use UPI wallets?
In its direction released last month, the National Payments Corporation of India (NPCI) said that UPI payments made using prepaid instruments such as UPI wallets will cost users a transaction fee of 1.1 per cent. However, the fee will be charged only to specific merchants. Moreover, there will be no fees applicable to merchant payments for a transaction value of less than Rs 2,000.
For more latest Economy News Click Here