Activate UPI on smartphone, transform the way you make payments & investments3 min read . Updated: 22 Dec 2020, 11:08 AM IST
Forget carrying cash, credit cards or even remembering those net banking passwords and ride the new revolution in banking to convert your smartphone into a wallet.
Often compared to a swiss-knife, your smartphone is a storehouse of information and entertainment as it doubles up as a music player, notepad, alarm clock and camera. The newest revolution in the banking space, United Payments Interface (UPI) converts your phone into a wallet too as it enables you to make payments seamlessly with the simple click of a button, as it ensures instant and secure transactions.
What is UPI?
UPI is a real-time payment system developed by National Payments Corporation of India (NPCI) which facilitates inter-bank transactions. By using this payment mode, you can transfer funds between two bank accounts instantly. The accounts are linked to on a mobile platform through an application and the entire process is regulated by the Reserve Bank of India (RBI).
How does it work?
All you need to do is download the UPI application on your smartphone and register your bank account with it. UPI works like an email ID for your money, creating a simple yet unique identifier which your bank uses to transfer funds and make payments through a system known as Immediate Payments Service (IMPS). With this, you no longer need your net banking login or account details to initiate a payment. All you need to do is open the app on your smartphone, select the beneficiary of the funds and transfer with just a click upon entering the right PIN.
Offering safety and convenience
Your UPI account is linked to your registered mobile number and is a single interface for instant money transfer. You don’t need a digital wallet or bank account details for this, offering the convenience of use. The process itself is straightforward and frictionless. It also provides a high-level of security with elements of two-factor authentication, mobile number verification, among other features.
Using UPI for smart investments
Whether you are a newbie to Mutual Funds or a seasoned investor, you can now use the convenience of UPI to make new investments. All you need is to be KYC compliant and have the UPI application downloaded on your smartphone with the mobile number registered. And, the next time you want to invest some money, choose UPI as the payment mode on the website of the AMC’s platform and make a smart investment straight from your phone!
What happens at the back-end?
To enable the payment, you will need to provide your UPI Virtual Payment ID, which is mapped to the bank account registered in your Folio. At the next step, you will receive a notification on your registered mobile phone from the UPI app for verification of details. The app will prompt for a PIN which will authorize the payment needed to invest. As you enter it, the amount is instantly debited from your bank account and transferred to the fund house.
Using UPI to bid for IPOs
The convenience of UPI is not just limited to Mutual Funds. You can even use it to fund an IPO scheme that you want to invest into. The process is simple. When applying for an IPO through the UPI app, fill in your bid details in the IPO application form and also state your UPI ID where indicated. Submit this form to your depository participant or the registered intermediary.
How funds are blocked and released
The bid details entered by you are uploaded onto the bidding platform (Stock Exchange) and shared with the escrow/ sponsor bank with your UPI ID. You will receive a request for blocking the funds equivalent to the number of shares that you have applied for on your registered mobile number. Upon confirmation, the amount is blocked in your bank account and subsequently debited only after full or partial allocation of shares. The balance amount is released and the shares are credited to your Demat account.
Every bank has its own limit to invest through UPI and you need to check this with your bank before you start investing. NPCI had earlier capped the UPI payment limit at ₹1 lakh, which was increased to ₹2 lakh from April 1, 2020. Secondly, if you use a Virtual Payment Address (VPA) of a bank account which is not registered in your Folio, the UPI payment does not get processed due to the Third Party clause of Securities and Exchange Board of India (SEBI).
Signing up for a UPI account will completely transform the way you spend and invest your money. This sophisticated public payment interface allows you to transfer funds to other accounts as well as make investments, all from your smartphone. The process is fast, convenient and completely secure. Get a UPI account now and start banking, the new-age way!