Advantages of UPI payment: How UPI is better than NEFT & IMPS

What is UPI?

Advantages of UPI payment UPI is an instant real-time payment system that facilitates inter-bank transactions. Launched in 2016 by the National Payments Corporation of India (NPCI), It has made digital payments extremely convenient by eliminating the need to enter multiple bank details such as account number and IFSC code during transactions. 

With UPI, users can easily transfer funds between bank accounts by just providing a Virtual Payment Address (VPA) in the form of a mobile number or Aadhaar linked UPI ID.

How does UPI work?

To make a UPI payment, users need to link their bank account to any UPI supported app like BHIM, etc. They can then create a UPI ID or VPA which acts as a virtual address to receive and send money. 

At the time of payment, users simply need to select the UPI app, enter the VPA of the receiver and transfer the required amount. The funds are instantly deducted from the sender’s account and credited into the receiver’s account in real-time in a secure manner.

Advantages of UPI

The key advantages of UPI payment that have led to its widespread adoption are:

Instant Funds Transfer:

With UPI, money can be sent and received instantly within seconds between bank accounts at any time of the day, 365 days a year. There is no waiting time for the transaction to process like other online payment modes. 

The recipient receives an instant notification on their mobile phone along with the money getting credited to their bank account in real-time. This makes UPI a very convenient option for instantly sending or receiving money from friends and family.

Low or No Cost: 

When users make payments to other banks, they do not have to pay any charges or fees for fund transfers. The transactions are almost instantaneous without any additional charges regardless of the transferred amount. This makes UPI a very convenient and affordable option.

Interoperable

The UPI payment system is interoperable, which means that any bank customer can send or receive money from any other bank using any UPI application. Interoperability has been established at both the PSP and consumer levels. 

So customers do not have to remember or key in multiple bank account details to transfer funds, they just need a virtual payment address.

Secure Authentication: 

It uses a virtual payment address instead of your bank account details, keeping them hidden. To make any payment, you need to authenticate it by entering your UPI PIN or using your mobile device’s fingerprint/facial recognition. 

Your UPI PIN acts as your digital signature for every transaction making UPI secure and preventing unauthorised or fraudulent transactions.

QR Code Support: 

UPI supports merchant payments through QR codes, which provides an easy and instant checkout option to customers. The payment is deducted instantly from the customer’s linked bank account once the QR code is scanned. This contactless and hassle-free experience boosts the adoption of UPI at merchant locations.

Real-time Fund Status

With UPI, payers and payees can see the real-time status of fund transfers instantly. As soon as the payment is initiated, both parties can see the transaction status whether it is pending, failed or successful. The real-time funds status feature removes any ambiguity or doubt for both parties regarding the payment status.

Mass Adoption 

With over 26 billion transactions in 2021 worth over $940 billion, UPI has become the most widely used payment method in India surpassing cards and other modes. The simplicity of the UPI interface, with options available in multiple Indian languages, has helped win over users from all age groups and demographics. 

How UPI is Better than NEFT & IMPS

While NEFT and IMPS are also instant money transfer systems, UPI has certain distinct advantages making it a better option:

Feature/Aspect	UPI	NEFT	IMPS
Full Form	Unified Payments Interface	National Electronic Funds Transfer	Immediate Payments Service
Operation Authority	NPCI	RBI	NPCI
Availability	24/7 fund transfers	Fixed processing timings and cut-off hours	24/7 availability
Transaction Speed	Instant	Up to 12 hours (usually within 2 hours)	Real-time (within 30 Minutes)
Ease of Use	Simple UPI ID creation	Requires bank details (account number, IFSC code, etc.)	Requires bank details
GST charges	No charges	Applicable	Charges are levied
Global Acceptance	Expanding through BHIM apps for cross-border use	Limited to domestic transactions	Limited to domestic transactions

Mind Blowing UPI Facts:

• As of 2024, India had over 452 million active UPI users.
• UPI accounts for nearly 80% of digital payments in India. 
• UPI transactions surpassed 100 billion for the first time in the financial year 2024, ending the year at 131 billion. 
• UPI processed 5,390 payments every second, with an average transaction value of ₹1,430.
• Compared with June, the volume of UPI transactions grew by 3.95% in July, while the value of transactions increased by 2.84%.

NTT DATA Payment Services India: Your Complete Solution for Digital Payments

NTT DATA Payment Services India offers a complete payment solution to advance both your offline and online businesses. From online payment gateway and mPOS to IVR payments and Bharat QR Scan and Pay, we ensure convenience and safety for all your payments.

Our payment solution for both large and small businesses includes payment gateway services. Payment gateway features include UPI, Bharat QR Scan and Pay, multi-bank EMI, multiple payment options, easy retry option, invoice payment, and payment options such as debit cards, credit cards, net banking, challan, Wallets, NEFT/RTGS, many more. Our payment solution is for the most efficient, convenient, and secured transactions. 

Conclusion

The advantages of UPI payment are clear when compared to NEFT and IMPS. As more users and merchants continue to adopt UPI, it is poised to remain in India’s digital payment, offering convenience, security, and efficiency that other payment methods struggle to match.

By understanding these advantages of UPI payment, users can make informed decisions about their digital payment methods.

FAQ

1) What is UPI?

UPI is an instant real-time payment system that facilitates inter-bank transactions. It allows users to instantly transfer funds between bank accounts by using a VPA like a mobile number or UPI ID.

2)What is the transaction limit on UPI?

The default limit for transactions through UPI is ₹1 lakh per transaction. However, banks may set their transaction limits.

3) Is UPI transfer free?

Yes, UPI transfers between individuals are free of cost. Users do not have to pay any charges for fund transfers

4) Is UPI secure?

Yes, UPI uses a secure authentication method. To make payments, users need to authenticate the transaction by entering their UPI PIN or using fingerprint/facial recognition on their mobile device.

5) How is UPI better than NEFT/IMPS?

UPI provides instant funds transfer 24/7 at no additional cost, has a simple interface, interoperability and more users. In comparison, NEFT has fixed processing times, charges and limited adoption while IMPS also has charges and limited network.