Why UPI is the best way to make cashless payments in India

It had been around nine months since the waves of demonetization had hit us and we had started using mobile wallets like PayTM. During a half an hour break between the classes in my college at Manipal, I decided to go to a nearby stall for some snacks. Despite being a small town, even the tea vendors are well versed in the use of wallets. They charge an extra fee of around two to five rupees if we use PayTM to pass on the transaction charges for transfer of money from their wallet to their bank account.

As I was about to pay, the vendor said, “Madam, I just got BHIM UPI. If you use that to pay, there’s no extra charge.”

The idea of paying less is always appealing to a college student. That was the first time I heard about UPI transfer and it intrigued me. Just then, another customer came and scanned the UPI code stuck on the wall to pay. I decided to find out more about UPI and the apps. Here I will share with you why UPI is the best way for making cashless payments and transferring money between bank accounts in India.


What is UPI?

Unified Payment Interface (UPI) was developed by National Payments Corporation of India (NPCI), and released on 30th of December 2016, under the guidance of RBI to help with cashless payments. A UPI-enabled payment app called Bharat Interface for Money (BHIM) enabled simple, easy and quick transactions through any smartphone using a VPA (Virtual Payment Address). Within 10 days, the BHIM app had 1 crore downloads from Android Play Store.


This was followed by a tie-up between Google and NPCI. Soon after, Google launched its own payment application for its Indian customers called the Google Tez.

Google Tez Payment App in India

Tez ran atop the unified payment interface but was better developed than the original BHIM application. Soon, Tez became more popular with the younger crowd for creating a UPI Identification due to the cashback it offered its users and the deals it presented for inviting more friends to join the app. Other mobile wallets followed the trend and integrated UPI to their own payment systems.


Benefits of using UPI for customers and business owners



The UPI interface does not act as a separate wallet from the bank account, but just as a path to transfer money from one bank account to another instantaneously, at any time required.

Here’s what makes this flexible interface lucrative not only for regular customers but for business owners as well.

UPI enables direct transfer to an account, without charges

The unique selling point of UPI is that it does not levy charges for transferring money between different banks. You can send up to one lakh using UPI without having to pay service or convenience charges!

This is cost effective than NEFT (National Electronic Funds Transfer), or RTGS. For NEFT, the cost ranges between Rs 2.50 and Rs 25, plus service tax, depending upon the amount. As RTGS is for high-value transactions, RTGS charges are more than the charges for NEFT.

Also unlike NEFT, which is available only on bank working days, excluding weekends and bank holidays, the  UPI transactions can be done round the clock;  and the transfer happens on a real-time basis.

With UPI there is no need to remember account numbers and IFSC codes

To transfer money, the sender only needs to enter the VPA (Virtual Payment Address) of the receiver which is as simple as to remember as a Facebook username! This saves a lot of hassle as one does not need to know the receiver’s account number and IFSC code to make a payment. Moreover, Payee registration is instant. The virtual payment address adds a layer of abstraction and security as the user need not disclose their account number to people.

The receiver does not need to have a UPI ID

Not everyone wants to create an ID with the interface and prefer staying away from mobile transactions. However, if you need to send money to someone who does not have a VPA, you can simply use their account number. You can even use Aadhar card number for transfer, as it has now become compulsory to link the Aadhar cards with your bank accounts.

Higher transaction limit with UPI

On applications like PayTM, there is a transaction limit of Rs 20,000 per day. With UPI, users can send up to Rs. 1 lakh a day as per the NPCI guidelines, while there’s no receiving limit. This enables the growth of smaller businesses and promotes regular users to go cashless by removing the headache of transaction limits.

Cashback with UPI

Most UPI enabled Apps offer a guaranteed cashback with every transaction made on UPI. Google Tez rewarded its users with fifty rupees for every friend they invited to join the app successfully which proved to be a great incentive and helped spread its popularity among the ever-broke college crowd.

No need for KYC with UPI

Know Your Client process which was implemented by Reserve Bank of India to prevent various financial crimes is a tiring job for most who are busy with their daily life. Recently even mobile wallets required getting KYC done for the continued use of their services. Thankfully as the interface is directly linked to the bank, KYC is not a requirement for usage. One-time KYC with your bank is sufficient and the application with UPI can be linked to the bank.

A smartphone is a must to enable UPI transfer.

Three Best UPI Enabled Payment Apps in India

With UPI being one of the latest technologies to hit the market for online funds transfer it has been implemented by many pre-existing as well as new applications.

The easiest and the best to use UPI Payment applications are:


The first one to support the UPI technology, this application has been constantly upgraded and maintained to include features while keeping it simple and lightweight. What sets it apart from the rest is the number of languages available for usage. Also, it allows you to send money using receivers Aadhar card.

Google Tez

Comparatively a more complex application, Tez is better suited for tech-savvy users. It has certain advantages as it syncs your Google contacts and fellow Tez users. It also uses audio QR technology to automatically send money without knowing beneficiary details in Cash-Mode Payments feature. The App is available in 8 Indian languages. While it takes a while to get used to the application, its integration with Google and the cashbacks give it a slight edge over BHIM.  You can transfer money without internet connection using QR Code. Since it is not a wallet app, you do need to add money from your bank account to the app.



Besides their regular wallet, PayTM integrated BHIM UPI and now it can be used to instantly transfer money directly between two bank accounts. No waiting time is required to add a beneficiary. Existing Paytm merchants can link their multiple existing bank accounts with Paytm BHIM UPI ID and accept money in whichever account they wish. It allows for a higher transaction limit of Rs 100,000 per day. They can also continue to use other wallet services such as online recharge, bill payment, ticket booking etc.


UPI is definitely the future of cashless banking and a must to know about. Setting up the account is simple and all the applications usually give a detailed step by step guide for setting up and usage. Hopefully, with a better understanding of the system, it will find greater acceptance and promote the Digital India goal.


Guest post by Shreyashi Chakrabarti. Shreyashi is a Final Year Computer and Communications Engineering Student at Manipal Institute of Technology



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  • author's avatar

    By: Somali K Chakrabarti

    Hi there! Welcome to Scribble and Scrawl! Here, I delve into themes related to positive lifestyle – from making smart-living choices, savvy financial decisions to nurturing the mind, body and soul. I share my travel experiences, explore facets of art and culture and highlight inspiring stories. Hope you enjoy reading my posts.

  • author's avatar

Somali K Chakrabarti

Hi there! Welcome to Scribble and Scrawl! Here, I delve into themes related to positive lifestyle - from making smart-living choices, savvy financial decisions to nurturing the mind, body and soul. I share my travel experiences, explore facets of art and culture and highlight inspiring stories. Hope you enjoy reading my posts.

  • Going digital is only way forward. I hope that we have better data connectivity across country which will ensure its fast adaptation. Thanks for posting details about UPI. lot of new things to learn.

  • This is so interesting! The way to go!

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