HomeTechnologyWhat is UPI, how it works & its technology?

What is UPI, how it works & its technology?

UPI is a payment system that can be used for online payment and helps people to transfer the amount using a mobile system. Using UPI you can instantly transfer the amount through an immediate payment service. UPI’s are in the control of RBI and IBA for the successful processing of fund transfers.

What is UPI, how it works & its technology?

UPI system was developed by an Indian national payment corporation. Well, UPI is secure as well as a safer system. As it uses two-factor authentication policies which are quite similar to the OTP system. But UPI makes use of MPIN. Different banks are providing their own UPIs for fund transfer. The main reason for the success of the

 UPI system can be used 24 hours every single day. However, even you need not pay any charges while making UPI transactions. UPI system often termed as Unified payment interface can help you to access all banks in one mobile application.

Working of UPI

The UPI system makes use of unique ID and IFS code. As day by day, everyone is using online platforms either for bill pays, shopping, barcode payments, merchant payments, or OTC payments. The UPI system seems to be the future of Digital Payment. Even nowadays everyone is using a mobile phone, various apps, data, and internet service. So, it is very useful if you switch to the UPI system.

What is UPI, how it works & its technology?
What is UPI, how it works & its technology?

UPI allows its customer to either send or request money transfers. Various ways can be used in UPI for a transaction like virtual payment address, QR code, mobile number, account number, IFSC, or Aadhaar number. You only should have a bank account either current or saving to make use of UPI. It will help you to do P2P and P2M transactions through android applications. The complete process to start a UPI transaction is having the following steps:

  • First of all, you have to download a UPI app for your mobile system either android or apple phone from the respective play store.
  • After the successful download, you have to create an MPIN that is mobile banking personal identification number.
  • Now you have to generate your Virtual payment address (VPA).
  • The last step is to link your bank account to the UPI service.
What is UPI, how it works & its technology?
What is UPI, how it works & its technology?

UPI Benefits

UPI is providing various benefits to the Indian economy and customers as they need not use any paper money to do money transactions. The UPI transaction, on the one hand, benefits the customer. On the other hand, the merchant also gets cost reduction using this system.

The UPI is bringing together consumers, banks, merchants, and financial institutes. You can say it is bringing a great revolution by making cashless and digital economy. The worldwide lockdown due to coronavirus-19 also enhances the digital transactions through the UPI system.

A survey mentioned that 80% of consumers are relying on the digital transaction system. Nowadays people prefer UPI as the complete process is fast, convenient, and easy to use. Even some times people get cash backs on money transaction. However, that is a great thing that encourages them to make online payments through UPI systems.

Future of UPI

The future of UPI is bright as the use of UPI is growing continuously due to economical rebounding. Even the UPI system up to some extent reduced the use of digital wallets by offering QR codes. You can use your mobile phone as a virtual debit card.

Now let’s discuss a few important points related to UPI say how UPI works internally. What is UPI architecture, working process of UPI, what is Bhim UPI ID, technology behind UPI, UPI technical specifications, UPI API integration as follows:

I am listing over there few banking systems which are supporting UPI services like SBI pay, Axis pay, MahaUPI, SBI pay, iMobile, HDFC Mobile banking, Union Bank UPI, Vijya UPI, United UPI, Lotza, KBL smartz, PNB UPI, etc.

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What is the working process of UPI?

UPI helps you to combine all of your bank services under a single platform. Moreover, you need to have two important things one is UPI Id and the other is your PIN. You can also make use of a mobile number and virtual payment address or UPI Id.

How UPI works internally?

It is quite easy to make transactions online by using the UPI system. Sometimes you have to fill up the details like the account number of the receiver, the IFSC code related to the receiver bank, the name of the receiver bank. But even if you don’t know the details. You can still make transactions by using the bank registered phone number, UPI id, and Aadhaar card number of the receiver. The generation of UPI Id is also simple and you need to follow few steps as follows:

  • First of all, you have to choose a particular app that you want to use for transaction purposes.
  • Then your mobile will automatically send a message from your current phone number that is already registered with the bank.
  • Later you have to create a PIN and go through a few other verification processes that are different from platform to platform.

First of all see that overall you can say that using UPI your transaction process becomes so easy. You can easily pay for the food, shopping, and any instant payment. Your common utility bills can be pay instantly without any worry.

What is UPI, how it works & its technology?
What is UPI, how it works & its technology?

But I agree with an important factor you might be worried about related to security. So even I assured you about reliability earlier also that IMPS network is serving nearly rs.8000 million transactions every day. You can find all process trustworthy as it uses the PIN process instead of just OTP.

UPI in Simple terms

 For simplicity, you can assume UPI as an email id for your money transactions. I already mentioned in the general introduction of UPI that it makes use of IMPS which is fast enough as compared to NEFT. So the UPI allowing your phone to act like a debit card and you need not keep any wallet or debit or credit card. Don’t you think it’s amazing?

The technology behind the UPI is just to make the transaction process faster. As you are already familiar that if you were trying to make any payment through a mobile phone by using the bank app it was quite uneasy to fill in a lot of details.

Yes, I agree that all the details say account number, account type, IFSC code, and Bank name are meant to provide security but still, the process is very long enough. Usually, banks take up to 12 hours when you add some new payee. But the process of UPI just lets you send money without using such details.

UPI Technical Specifications

The UPI technical specifications can do much more beyond your expectations. Let’s understand it with help of an example.  You know well to make transactions two have two options. Either you can use the local address that is the virtual address or the global address which includes the mobile number, bank account number, and adhaar number.

The virtual address allows you to make transactions online and if the bank gives you a virtual address that matches your email id you need not any app to send money. Say you hired a taxi and have to pay back for the fare. You only have to share the virtual address with the driver rather than any bank details. Using the virtual address the driver will request money and you have to authenticate the transaction through a password.

UPI Integration

UPI API integration works as a layer over the IMPS that help in transferring the money using mobile phones. Nowadays companies are moving forward to register their identifiers on UPI platforms. I think the cashback offers can keep the users hook up with wallet systems. One thing is sure that unless these wallet companies come up with an innovative way to stay relevant, it’s going to be an uphill task for them to survive.

The UPI Architecture

The UPI architecture makes use of an immediate payment system and adhaar enabled payment system to provide seamless settlement between accounts. It allows push and pull services and works with barcode, recurring payments, and different other modes.

The UPI architecture is following the three main patters as follows:

What is UPI, how it works & its technology?
What is UPI, how it works & its technology?
  • Authentication and Authorization separation– In earlier banking transactions while making any payment through credit card the authentication verification is done through the means of CVV number and OTP used for authorization purpose. But UPI made it simple by the use of PIN and mobile number registration.
  • Identity management federation– This facility provides the advantage of multimodal. It makes use of Adhaar based identification instead of biometric and knowledge base which is driven by a third-party provider named unique Identification Authority of India.
  • Transaction facilitation of the third party– UPI deals with transactions by using a broker model which is based on four-party transactions and makes all banking very interoperable. The complete transaction protocol is providing a scalable system as it is using non-blocking and asynchronous design.

Don’t get confused with the terms push and pull. These are simple as push means to send money on the UPI while pull means to receive money. The only need is to establish an identifier nothing else. It supports the safety of sensitive information over the internet.

UPI helps in reducing the unbanked population. The UPI not only providing you the way to transfer money only during any specific banking payment but you can even request money or send money to someone as a gift also. Various modifications in UPI are in the progress.

What is UPI, how it works & its technology?
What is UPI, how it works & its technology?

You can refer to a few apps which are supporting UPI are PhonePe, Paytm, Amazon Pay Truecaller, Hike, Mobikwik, Google Pay, FreeCharge, and many more. The only task you have to perform is to create your UPI Id and the steps of it are already discussed in the article you can refer to them.

What is BHIM UPI Id?

The Bhim UPI app is quite popular among the customers as it is feature enriched. It is used for quick, simple, and easy processing of transactions. The app is developed by NPCI which can be used for android as well as an iOS mobile system. Using the app you can make transactions through QR code or UPI Id.

To gain access to Bhim UPI without internet you have to dial *99# from your mobile phone and can have all features of the Bhim App. The UPI Id used in it is a sort of identification that is different for all users according to their bank details. That UPI id is a must for making banking transactions say receiving and sending the money.

What is UPI, how it works & its technology?
What is UPI, how it works & its technology?

Along with that the account holder also has to set up a PIN to provide authorization for banking transactions. The PIN is of 4 digits which are used for the identification of a person.

Bhim UPI ID example

To understand what is the  Bhim UPI ID see it starts with mobile number digits following @ symbol and in end, there is an app name you are using. Say you are having mobile number 1234567890 then while using Bhim app that is very popular nowadays for making online transactions. Your Id will be like “123456@bhim”.

You have to provide some details related to your bank in the app. After that, the app will automatically send a message from your mobile number to process some verification. Later you only have to generate a PIN that will allow you to send money and even you can request money from any of your contact persons.

Bhim (Bharat Interface for money) UPI that was launched in the year 2016 allows its users to make changes in UPI PIN and checking the account details along with the history of transactions. Every UPI app has its limit to make per day transactions. So you can choose accordingly the best one that allows you to transfer money as per your need. You can send money, request money, scan or pay, and even do a lot of transactions using a single UPI app.


You can say UPI is facilitating its users with various features and advantages say reliability, No minimum transaction limit, inclusivity, and Real-time transfers. These features are very useful for startups and small businesses.

UPI is an incredible advance right away and it is set to turn into a proficient option in contrast to versatile wallets. Using UPI you can make payments quicker, simpler, and smoother for a huge number of individuals in India. It can make micropayments which will profit the two purchasers and dealers.

I hope the above information will be quite beneficial for you. I really appreciate your comments and view regarding it.

Anjali Saini
Anjali Saini
A hardworking person, always adventurous about learning new things. Aiming to develop new skills and passion for computer technology.


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