UPI, expanded as Unified Payments Interface, allows users to take the cashless path and transact digitally. One can send/receive money through an app that can be downloaded on all Android-based smartphones. Launched under the aegis of the National Payments Corporation of India (NPCI) and Reserve Bank of India (RBI), UPI offers customers multiple benefits such as instant money transfer, hassle-free real-time payments, etc. The UPI app allows users to transact without having to provide bank account details or IFSC code. This is one of the main advantages of this app-based fund transfer service.
The NCPI launched this payment system post demonetization to encourage cashless transactions in the country and make mobile-based payments easier. However, the question is what makes UPI better? This question especially arises when comparisons are made between UPI and Immediate Payment Service (IMPS), which offers similar features and benefits that are available through the UPI app.
Difference between IMPS and UPI
To better understand both fund transfer systems and decide which is better, let us first understand the difference between IMPS and UPI.
One of the major differences between UPI and IMPS is the convenience and ease that UPI gives a customer when compared to IMPS. UPI allows complicated and lengthy information to be consolidated into a simple virtual address. For example, instead of making an IMPS fund transfer to Arun Iyer with account number 0983756098654076 at XXX bank, XXX branch with IFSC code XXX09865, one can do the same with UPI using only Arun@xxxbank.
So, all you need for a UPI transaction is a Virtual Payment Address (VPA). However, this is not the case with IMPS, where one needs the name of the account holder, the name of the bank, branch, IFSC code, and account number. Not just this, if a payment is being made for the first time to a payee, he/she needs to first be added as a beneficiary. But this is not the case with UPI.
Details needed for IMPS transfer
Name of account holder
Name of bank
Details needed for UPI transfer
Why is UPI better?
Simplicity & ease of transacting: Most people get annoyed if they have to fill in lengthy payee details, add a beneficiary and then make a fund transfer. Also, a bank cannot process a fund transfer using IMPS as soon as the beneficiary is added. Some banks, also have a waiting period of 30 minutes, after which, it is allowed to make a fund transfer. This is not the case with UPI as one does not need any other details except the VPA to initiate a fund transfer.
One can also make collect requests: UPI provides customers the unique and one of a kind option of making a collect request for payment. A collect request can be sent to the person who owes you money through the app and one can also set the deadline within which the money has to be paid. Through the UPI app, one can directly send a message to a person and ask for the due payment. Once the client approves, payment will be credited instantly.
A single app, multiple bank accounts: The UPI app gives users the convenience to link all their existing bank accounts in one single app. Therefore, there is no need to download multiple apps for different bank accounts. All existing bank accounts can be linked in the app. One can also set a default account for making payments.
Added security: The UPI app is backed by the RBI and hence comes with many security features. It is much safer than IMPS or other net banking facilities. Since no bank account details or other secure data is provided, it is very reliable and safe.
No charges on transaction fee like IMPS: Most banks do not charge a transaction fee for UPI transactions, unlike IMPS where a set fee is levied depending on the amount of money that is transferred.
The UPI app is the way towards a cashless future. It has numerous advantages and also offers the customer the safety and security while transacting.