Decoded – What is UPI & How Does UPI Work?

In this day and age of the digital era, digital payments have come a long way. We used to remember digital payments to be unsafe, but now that cannot be any farther from the truth, digital payments are safer than ever, and you have UPI or Unified Payments Interface to thank for it. UPI payments are encrypted and henceforth super secure. In this article we will explain what a UPI ID means, how you can make easy payments without worrying about torn money or uneven change, hassle-free payments are the future and UPI fulfils that promise.  

Unified Payments Interface, or UPI, was first widely noticed or used in India in 2016 when the Prime Minister of India initiated the demonetisation of certain cash currencies across the country. It has steadily grown since UPI payments are fast, secure, and quite convenient. It is an easy-to-use process that provides instant transactions between two parties or even between your bank accounts.   

UPI or Unified Payments Interface offers a unique banking experience where it links all your bank accounts under a single application. There are several options of applications that you can pick and choose from, some being independent and some powered by your bank. UPI merges your accounts so that even when one of your banks’ servers is offline, you can just as easily pay from another account using the same application. UPI payments add a ton of services to your banking experience, makes the transactions smooth, and allow B2B payments as well as peer-to-peer payments as per your mode of convenience.  

Traditionally speaking, you required a lot of information to initiate a bank transfer, like Bank account number, IFSC code, and bank name along with the address of their branch. UPI payments don’t require these fields of information every time you need to make a transaction. The consumer just has to verify their details once while signing up, and it generates a unique UPI ID also known as a Virtual Payment Address (VPA), and a QR code through which all transactions can take place with ease. 

Advantages of UPI   

  • One does not need to give out their banking details to receive payments, as giving out bank account details to strangers can be dangerous.  
  • Bank account numbers and your IFSC codes can be hard to memorise as compared to your simple and unique UPI ID.  
  • You are free to choose your UPI ID, which is not the freedom you have for bank accounts.  
  • You always have the option of changing your UPI ID if you ever feel anxious about its safety. 
  • UPI IDs can also contain your mobile number, making them much easier to remember and memorise.  
  • UPI transactions can also be used for investments like stock markets investments, mutual funds, fixed deposits, etc. making UPI payments is beneficial over other types of payments such as IMPS, digital wallets, and card payments.  
  • You can add a UPI PIN of your choice that you can change easily if you ever feel like it.  

  Key pointers and takeaways  

  • Unified Payment Interface (UPI) makes sure you’re your payments and transactions are encrypted and secured.   
  • You can add a transaction PIN of your choosing.  
  • UPI payments are widely accepted over the country, you can find UPI QR codes in every retail store big or small.   
  • Mobile banking apps have started to offer UPI as an option to transfer funds.  
  • Google Play Store and iOS app stores are loaded with UPI supporting apps that can be easily found and downloaded on your smartphone.  

Apps like Gpay, PayTM, PhonePe, etc. are some examples of UPI-supported apps that India has to offer furthermore, you can easily add your UPI payments method with your AppleID. India also has an official app introduced by The National Payments Corporation of India which recognises and QR code even if it was originally meant for specific apps. All these aforementioned apps allow UPI-based payments and fund transfers.   

Additionally, banks across India like the State Bank of India, Axis Bank, HDFC Bank, etc., offer mobile apps that offer UPI-enabled services for Instant transfers across their own and other bank accounts.   

How is UPI ID used?  

For a UPI transaction to be completed you will need to know the UPI ID of the other party, be it a person or a business. When you are in hold of said ID, you just need to enter the amount that needs to be transferred. Then you enter your PIN that starts the transaction from your savings account, this PIN can be changed easily anytime through your debit card and phone. Once the PIN is entered, the transaction is almost instantly completed.   

How does UPI work?  

UPI merges tons of banking services under one application, for example merging all your bank accounts to make your transactions smoother, instant, and secure. All you need to do is download your application of choice from your Google Play Store or iOS store, verify your details and pick a PIN of your choice, and you are good to go. This PIN can be easily changed and so can your UPI ID if you feel like changing it into something much more suiting your tastes.  

What is an example of a UPI ID?  

UPI IDs usually combine your name or your linked email address name or even your mobile number as a prefix and then add the bank host as its suffix.   

XXXXXXXXX@upi is a simple template of the example. All UPI IDs follow this simple template to create your very own unique ID.  

What is the UPI ID number?  

UPI ID number serves as a unique identification marker to your bank accounts that you use to send and receive funds from one bank account to another. It can also be used to send and receive funds from one person to another. 

What is the maximum amount transferred through Paytm UPI?  

The Paytm app allows you to make a transaction up to 1 Lakh INR per day. However, your bank can set an upper limit of transactions based on your previous transactions and credit score. This can be resolved once you get in touch with your bank and fill out some necessary paperwork, or sometimes just a verbal confirmation is perfectly fine.  


Unified Payment Interface (UPI) has made transactions more streamlined, completing all transactions big or small at the tip of your fingers. It is safe, secure, and encrypted so that these payments can’t be accessed by third-party data miners, making sure nothing is stolen or missing its projected course. You don’t need to memorise complex numbers and bank details for a simple transaction, making it hassle-free and a seamless process.  

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Frequently Asked Questions  

Who conceptualised UPI?  

United Payment Interface (UPI) was conceptualised and then later on released by the NPCI under the establishment of the RBI and the Indian Banks Association  

How to change my UPI pin? 

To change your UPI pin, you will need to open up your app and go to the bank details, where you click on the bank account you want to change the PIN for  
Then click on FORGOT UPI PIN, which will then ask for the last 6 digits of your debit card along with the expiry date  
Then you should enter your new PIN and the OTP you get through the SMS.  

How to open a UPI account?  

To open up a UPI account, you will need to download a UPI-enabled application through your play store where you will need to enter your registered mobile number.  
An OTP will be sent to the number for verification, once the verification is complete you have to select from the list of bank accounts you have registered to your phone number.  
Select the bank account you want a UPI ID for and set a PIN of your choice for future transactions.  

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