UPI Vs. NEFT – All You Need To Know

Time to read: 7 mins | December 28, 2017

Technology is making our life simpler by the day. It can be safely said that it has brought in a sea change, or a paradigm shift in the way we conduct many of daily chores. And today, we can’t imagine living without the internet ––– it has become a way of life across age groups.

Until recently, cash and cheque were the two preferred modes of payment. But now, there are host of mediums through which you can transact online. All you need is a smartphone and/or laptop powered with a high-speed internet connection, and it helps you save time, energy, while you transact at your convenience and comfort. Moreover, it virtually eliminates errors and gives you control over your finances.

In this article, we’ll elucidate about Unified Payments Interface (or UPI)——a relatively new mode of transacting——and National Electronic Funds Transfer (or NEFT).

Unified Payments Interface

The Unified Payment Interface (UPI) launched by the National Payments Corp. of India (NPCI), which went live last year (in August 2016), has brought about a revolutionary change in the way you can transact today.

It is a system that powers multiple bank accounts with a single mobile application (of any participating bank), merging several banking features, and facilitates seamless fund transfers as well as merchant payments into one hood.

UPI runs on Immediate Payment Service (IMPS) platform available 24X7. Currently, many banks have their own UPI apps which have superseded other modes of payments–––at least where daily transactions are concerned–––reducing the dependence on paper currency.

The 10 key benefits of UPI app are:

• Facilitates quick, easy, seamless, cheapest way of transferring money anytime, anywhere
• Single click 2-factor authentication aligned with regulatory guidelines
• You are not required to share your bank details –– simply transact using a UPI ID also called a Virtual Payment Address (VPA)
• No need to share or remember sensitive information
• You can link multiple accounts using one UPI based app and will no longer need different apps of different banks
• The QR Code Scan feature facilitates payment for online as well as offline purchases. All transactions are possible through this one app, as all your accounts can be linked to a single window
• No need to carry wads of cash, run to ATMs, or struggle to render exact amount
• Collect Payment service has made it easier to ask for payments
• Fund settlement is on real-time basis
• You can raise complaints directly from your mobile app

Please note, you can download the UPI app of any bank of your choice and use it efficiently. You do not need the UPI app of the bank you have an account with.

Axis Bank’s, Axis Pay UPI App is easy to use, with which you can link any bank account to send or receive payments instantly and securely with just your UPI ID which can be just your name or your mobile number.

Here’s how you can download Axis Pay UPI App:

Step #1: Download the Axis Pay UPI App (from Play Store for android users or App Store for iOS users). Once the download is complete, enter your mobile number for verification.

Your mobile number will fetch all your account details. Check these details thoroughly and click on ‘continue’ to confirm.

Next, you will be directed to create a six-digit secured pass code: you create one and remember it. From now on, this pass code number will be required each time you log-in to the app. Note: Please do not share this code with anyone and keep it safely.

Step #2: Choose your Bank with which you have an account. from a list of banks. You will be sent a One-time password on your registered mobile number.

And, once you’ve selected the bank, it’s sorted; your account details will be automatically fetched. When you have confirmed it, a confirmation message will be displayed.

Step #3: Create a UPI ID or Virtual Payment Address (VPA), which can be as simple as your name or mobile number, followed by the bank address. For e.g., be "yourname@axisbank" or “9800000111@axisbank”

This virtual ID becomes your identity to anyone transacting with you, and the app doesn't require additional information to send and receive money.

As mentioned before, the real pull or attraction of the UPI app is, you need not be the bank’s customer to use its app. For example, if you want to use the Axis Bank’s UPI app, you need not hold an account with the same bank. The UPI ID will be linked directly to your bank account.

Step #4: Once the above steps are followed you can send and receive money using the UPI app immediately, as oppose to net banking, where you have to wait until your payee is added to your list. Remember, the money can be transferred even over the weekends and bank holidays.

Unlike a mobile wallet, there is no concept of loading money into UPI. It’s a direct account to account transfer using your UPI ID or VPA. Plus, the daily transaction limit for UPI apps is Rs 1 lakh, much higher than mobile wallets.

Download Axis UPI Pay App now; make and receive payments instantly. Axis Pay UPI has a clean and simple interface with interesting features. Further, it is secured with a 6-digit password and its speed facilitates a seamless transaction experience.

With a UPI App on your smartphone, you no longer need to refill your e-wallets, instead transact and keep earning interest on the balance in your savings account.

National Electronic Funds Transfer

National Electronic Funds Transfer (or NEFT), started in November 2005 by RBI, is a nationwide payment system that enables you, the customer, to transfer funds from any bank branch to another individual/firm/corporate––––known as the beneficiary––––having an account with any bank’s branch in India.

Unlike UPI, there isn’t a minimum or maximum transfer amount limit in case of NEFT. And unlike Real-Time Gross Settlement (RTGS), fund transfer does not take place on a real-time basis. The NEFT transactions are processed throughout working days, but operate in hourly batches and the settlements are scheduled as below:

• Monday to Friday: 12 settlements from 8:00 a.m. to 7:00 p.m.
• Saturday (except 2nd and 4th): 6 settlements from 8:00 a.m. to 1:00 p.m.

The transactions received after the cut-off time is processed on the next working day.

To execute an NEFT transaction, the process followed is:

• The remitter, fills a NEFT application form providing the details of the beneficiary such as name, bank, branch name, Indian Financial System Code (an alphanumeric code used to identify a particular bank), account type, account number, and the amount to be remitted. By doing so, the remitter authorises his/her bank branch to debit the account and transfer the amount to the beneficiary.
• The originating bank prepares and sends a message to its polling centre, also known as the NEFT Service Centre.
• The pooling centre then forwards the message to the NEFT clearing centre to be included in the available batch.
• The NEFT clearing centre sorts fund transfer destination-wise and prepares accounting entries to receive funds from the originating banks (debit) and give (credit) the funds to the destination bank. And thereafter, bank-wise remittance messages are forwarded to the destination bank through their pooling centre (NEFT Service Centre).
• The destination banks receive the inward remittances messages from the Clearing Centre and pass on the credit to the beneficiary customers’ accounts.

The beneficiary can expect to get the credit to his account within two business hours from the batch in which the transaction was settled. If the transaction did not go through or it was unable to credit the account of the beneficiary for whatever reason, the destination bank will return the transaction (to the origination bank branch) within two hours of completion of the batch in which the transaction was processed.

You can initiate an NEFT transaction using either of the following modes:

• Internet banking
• Mobile banking
• Visit to the bank branch (but remember, not all branches may be NEFT enabled)

There is a nominal charge, ranging from Rs 2.50 to Rs 25 depending on the value to execute a NEFT transaction. It’s very reasonable and doesn’t pinch the pocket.

Transferring funds via NEFT offers the following advantages:

• No need to send physical cheque or demand draft to the beneficiary
• No need to worry about loss/theft of physical instrument or likelihood of fraudulent encashment
• Reduces paper work to a great extent
• It is cost effective
• You get a confirmation of the remittance via SMS or email
• Comfort to transact from anywhere (provided you choose internet banking or mobile banking as the mode)
• Facilitates near-to real-time fund transfer in a secure manner
• Enables better control over finances

It is for these reasons that many are opting for NEFT as the medium to transfer funds today.

To conclude…

Both, UPI and NEFT have their unique features and benefits. With technology playing a role of an enabler, use both of these efficiently and sensibly. It will make banking extremely quick, easy and convenient for you. Banking will literally be at your fingertips.

Be smart.

Bank smart.

Happy Banking!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.