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What is UPI and how does it work?

Curious about Unified Payments Interface

What is UPI and how does it work?

Unified Payments Interface (UPI) is a realtime payment system developed by the National Payments Corporation of India (NPCI). It enables users to link multiple bank accounts to a single mobile application and make seamless, instant, and secure money transfers. UPI allows users to send and receive money, pay bills, and make online and offline purchases using their smartphones.

Here's how UPI works:

1. Registration: To use UPI, you need to download a UPIenabled mobile application from your bank or any UPIenabled app provider. You will need to register and create a UPI ID, which is a unique identifier linked to your bank account.

2. Linking Bank Accounts: Once registered, you can link one or multiple bank accounts to your UPI app. You need to provide the required details and complete the verification process to link your accounts.

3. Transaction Initiation: To send money, you need to enter the recipient's UPI ID or scan their UPI QR code. You can also initiate a transaction by providing the recipient's mobile number or bank account details linked to their UPI ID.

4. Transaction Authorization: After entering the transaction details, you need to enter your UPI PIN, which is a secure four or sixdigit code set by you during the registration process. This UPI PIN acts as an authorization for the transaction.

5. Instant Transfer: Once the transaction is authorized, the money is instantly debited from your bank account and credited to the recipient's account. Both the sender and the recipient receive instant notifications of the transaction.

6. Payment Requests: UPI also allows you to request money from other UPI users. You can generate a payment request specifying the amount and send it to the payer. The payer can authorize and make the payment using their UPI app.

7. Additional Features: UPI offers various additional features, such as the ability to check account balance, view transaction history, create and manage virtual payment addresses (VPAs), and set transaction limits.

UPI leverages the Immediate Payment Service (IMPS) infrastructure and uses the twofactor authentication (2FA) system for secure transactions. It operates 24/7, enabling users to make payments anytime, anywhere, and facilitates interoperability between different banks and payment service providers.

It's important to note that the exact user interface and functionalities may vary slightly among different UPI apps, but the underlying principles and transaction flow remain the same.

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