What is UPI PIN

UPI is the instant and real-time payment system that will let an individual send money instantly from their own bank account to another's. UPI will work as an alternative to payments made through IMPS or NEFT.

It is a secure transfer of funds through the UPI ID or PIN, and it will act as the virtual payment address for the user while they set up the account.

UPI PIN stands for Unified Payments Interface Personal Identification Number is a four or 6-digit number that is set by the users themselves; it is either at the time of the UPI registration on a UPI application or later.

Since the UPI PIN will allow the confirmation of a transaction by the user, it should not be shared with any stranger in order to avoid fraud.

The UPI PIN is a password that needs to be provided by the user to make sure of a transaction, and here is why it is crucial to carry out the transactions through UPI:

• The UPI PIN is unique to each bank account, and it is set up by the owner of the account. Therefore - it could be used only by the account holder, and thereby it ensures safety.
• The users could have an option to select their own unique UPI PIN that makes it simpler for them to remember.

Following are the applications that utilize a UPI PIN for the authentication of a fund transfer:

• BHIM App
• Paytm
• BHIM SBI Pay
• BHIM PNB
• Google Pay
• PhonePe

In order to use a payment mode, individuals need to sign up for the service at the bank. This could be done on the phone or internet banking of the specific bank. After that - here are the steps that need to be followed in order to generate the UPI PIN:

1. Go to the UPI application of your choice - that is, BHIM, PhonePe, and much more.
2. Scroll to the Bank Account section on the application; this section shows all of the bank accounts that are linked with this specific application.
3. Choose the bank account for which you want to set up UPI PIN. You would see a setting option in the case you have never set a UPI PIN for the bank account.
4. Enter the last six digits and expiry date of the debit or ATM card.
5. Now, you would get an OTP from the bank on the registered phone number. In the next display, enter the OTP and the UPI PIN you would want to set for an account, and then click on submit.

In order to change the UPI PIN, you would have to follow the below-mentioned steps:

1. Open the application.
2. Click on the option UPI to send money to anyone in the application. 
3. Click on the settings icon and the top right of the application, and you need to go to the bank section.
4. Now, you will have to select the change PIN option under the bank account for what you want to change the UPI PIN.
5. You will next have to give the last six digits of the card number, along with the expiry date.
6. Now, you can enter the current UPI PIN, followed by the new UPI PIN.
7. Re-enter the new UPI PIN and then click on the option confirm.
8. Your UPI PIN will now be changed.

Note: The UPI PIN is a password that holds control over the funds in the bank account. Therefore - the UI PIN needs to be kept highly confidential. You will also have to set a UPI PIN that is simple to remember so that it is not forgotten.

The below-mentioned instructions can be followed to send money using the UPI PIN:

• Log in to the UPI app that has been linked to the bank account.
• Click on the option - send money.
• Enter the UPI ID of the beneficiary or then scan the OR code is its payment to the merchant.
• Enter the amount that you would wish to send.
• Click on the option - confirm. 
• Enter the UPI PIN on the next screen and then submit it to finish the process.

Individuals can transfer funds in any of the following ways-

• By entering the receiver’s UPI ID
• By scanning QR code 
• By entering the bank details of the receiver (account number and IFSC code) 

Note that the maximum limit for each UPI transaction per day is Rs. 1 lakh as per NPCI’s website. However, this limit may vary from one bank to another. 

Now that you know what UPI is and how you can transact with it, let’s understand how it works. 

To understand how UPI works, it is essential for individuals to know about the following entities that are involved in the transaction process-

• National Payments Corporation of India (NPCI)

NPCI operates settlement systems and enables digital payments in India. In the case of UPI payments, this entity links banks and Payment Service Providers (PSPs). It ensures that data flow between mobile-based payment applications and banks are sent to the right destination. 

• Payment Service Provider (PSP)

Payment Service Providers refer to mobile-based applications that enable users to initiate and complete UPI transactions. Examples of such mobile applications include PhonePe, BHIM, and Google Pay. 

These applications enable users to create a UPI ID through which they can accept or make payments. Currently, as of October 2021, there are over 20 NPCI-certified mobile apps that can issue UPI handles. That said, all these PSPs require a sponsor bank before they are able to onboard users. For example, some of the sponsor banks of Google Pay are ICICI, HDFC, SBI and Axis. 

• Sender’s bank 

In the case of UPI transactions, funds are transferred from the sender’s (issuing) bank to the receiver’s (merchant’s) bank account. Issuing banks have to debit money once the NPCI places a request. Moreover, they have to send a response to NPCI once the debit is successful. 

• Receiver’s bank

As a part of the UPI transaction process, the acquiring/ receiver’s bank has to credit funds upon the NPCI’s request. Also, acquiring banks have to send a credit response to NPCI once the credit is successful. 

• Payee PSP 

Payee PSP refers to the payment gateway/acquirer that a merchant utilises for P2M transactions. 

These are some of the entities that collectively work towards ensuring that the UPI system functions flawlessly.