- Date : 02/06/2023
- Read: 4 mins
Indian consumers are using UPI and UPI wallets to make small payments, thanks to hassle-free, fast transactions. UPI wallets offer more security and convenience.
- UPI wallets are now interoperable across multiple platforms. According to RBI's directives, every UPI platform was required to provide an interoperability facility for tier QR codes.
- You can use your Paytm wallet to make payments at a shop with the QR code of another platform, say PhonePe.
- For making small payments (Rs. 20, Rs. 30, or others), the UPI wallet is far more secure than UPI payments and bank transfers.
UPI (Unified Payments Interface) has gained immense popularity among Indian consumers who use it to make small payments almost everywhere, from local Kirana shops to movie theatres and shopping malls. Payment can be made by simply scanning the QR code, making it a convenient and widely accepted payment method.
According to the NCPI (National Payments Corporation of India), most people prefer to link their bank accounts with a UPI app to make small payments. However, mobile wallets and PPI (prepaid instruments) have also become popular recently. This has been possible mainly because of the many benefits they offer.
To get a closer look, let’s first try to understand what a UPI wallet is and how it differs from UPI.
UPI wallet: What is it?
A UPI wallet functions as a digital version of your physical wallet. Instead of withdrawing money from the bank every time you need to make a small payment, you can link your bank account to your UPI wallet and withdraw a smaller amount, such as Rs. 100 or Rs. 1,000. This money can then be used to pay for groceries, utilities, rent, and other smaller amounts directly from your UPI wallet.
Some of the most popular UPI wallets available in India are:
UPI Lite wallet (an “on-design" wallet launched by NPCI in 2022)
- Paytm wallet
- Amazon Pay wallet
- PhonePe wallet
Also Read: How does UPI work?
Benefits of interoperability for UPI wallet users
According to RBI (the Reserve Bank of India) guidelines, UPI wallets now offer the advantage of interoperability, allowing users to make transactions across different platforms.
Previously, if you had a Paytm wallet but visited a Kirana shop with a PhonePe QR code, you would not have been able to make a purchase. However, with the implementation of interoperability across all UPI apps by March 31, 2022, users can now make payments using their Paytm wallet at a shop with a PhonePe QR code and vice versa.
Differences between UPI and UPI Wallet
UPI
- When you use UPI for small payments, you need to enter your UPI PIN, which is linked to your savings bank account.
- Each time you make a small payment using UPI, it gets reflected in your bank statement, which can make it look cluttered and difficult to read.
- Making multiple small payments using UPI may expose your savings account to virtual risks, such as online fraud or unauthorised access.
UPI Wallet
- The interoperability of QR codes across various platforms reduces the risks of online frauds. This is because you can add a certain amount of money to your UPI wallet and make payments directly.
- UPI wallets come with advanced security features. If you are using Paytm's UPI wallet, it is bound by a specific device. It is not possible to use the account on another device.
- When you add money to your UPI wallet, the money is readily available to you. You simply have to scan a QR-code and pay. This makes payments faster.
- You can also connect your UPI wallet to credit cards. There are certain times when you may not have sufficient money in your bank account. In such a case, you can pay a small amount of money to withdraw funds from your credit card and deposit it in your UPI wallet.
- With UPI Lite, you don't even need an internet connection to make small payments. You can make payments (up to Rs. 200 per day) seamlessly within seconds. For an on-device wallet, your total UPI Lite balance limit is Rs. 2,000.
Also Read: UPI and E-mandate on recurring payments: RBI announcement
Final word
UPI wallets are a fast and secure alternative for small payments, with reduced risks of online fraud and scams. UPI Lite makes it even easier to make payments without an internet connection. However, a 1.1% interchange fee is applicable for merchant payments over Rs. 2,000, but only for certain categories. Payments below Rs. 2,000 do not incur any fee.
