In recent years, digital payment methods have transformed financial transactions 360 degrees and made our lives incredibly easier and more convenient. Among all other online payment modes (like mobile banking, internet banking, PoS, AEPS, banking cards, etc.), the Unified Payment Interface (UPI) has gained surging popularity in modern finance and digital India. In the financial year 2023-24, this revolutionary payment mode has witnessed a 57% rise in volume and 44% growth in value as compared to the previous year. In fact, UPI transactions phenomenally rose to about 55% in volume to INR 13.44 billion in March 2024, whereas March 2023 reported for 40% value accounting for INR 19.78 trillion.
UPI’s diverse transaction facilitation, including instant and real-time payments 24/7, QR code-based payments, mobile recharge, online shopping, ticket booking, single-click, two-factor authentication, etc., contributes to its upward growth trajectory. Users leverage this universal platform to make payments to peers and merchants without any hassle, link multiple bank accounts from different institutions, and check bank balances, thus simplifying funds management. The biggest reason for such seamless transactions is the usage of Virtual Payment Address (VPA).
Understanding VPA in Modern Finance
A virtual payment address represents one form of digital identification through which people can seamlessly transfer or receive funds using various UPI-compatible apps (like Google Pay, PhonePe, CRED, etc.). It is an amalgamation of alphabets, numerals, and special characters that serves as a virtual identity meaning that senders do not have to provide different recipients’ specific information when making money transfers, such as their bank account numbers, branch names, or IFSC codes. This means that your account can be recognised by everyone via VPA using this single indicator, making things truly effortless. A standard VPA appears as username@bankname.
This username can be your name, registered mobile number, or similar identifiers, while the “bank name” could be the app’s associated bank or simply UPI. Some examples of VPAs include “123456789@fdfcbank,” “yourname17@upi,” “yourname@axisbank,” etc. Interestingly, users can also create customised VPAs and check for the availability of their preferred VPA.
Are VPA and UPI Same?
A VPA is generally referred to as a UPI ID on UPI-enabled apps. Although both refer to the same thing, they are not interchangeable. They serve as virtual addresses for your bank account for conducting money transfers. Thus, whenever someone asks for your UPI ID, it actually means requesting for VPA, as a result of which they can recognise your account during sending or receiving funds.
Having a Glance At Creating a VPA of Your Choice
As an abstraction layer, a Virtual Payment Address helps connect the user with their bank account. When transactions are initiated, the UPI system utilises VPA to ensure that the payment gets en route to the correct bank account. The process of creating a VPA involves some essential steps:
Step 1: How To Create VPA?:
Starting to use UPI and setting up a Virtual Payment Address (VPA) is simple. Users must follow a simple process to install a UPI-enabled application on their smartphone, which can be either their bank’s mobile application with UPI functionality or a third-party UPI application. Next, they should link their bank account by entering the phone number registered with the bank.
The process will then prompt users to provide some important details, followed by the option to choose between VPA or UPI ID. They may opt for their preferred choice or even create a custom-made VPA ID. The VPA usually takes the form of “username@bank” or “username@payment provider.” When account creation is successful, users must generate their personal four or six-digit UPI PIN for security purposes. Once this step is completed, one can start making fast and easy payments using UPI in no time by just tapping his/her phone 24/7.
Step 2: Linking Bank Account:
As mentioned above, after creating a VPA, the user should connect it with his or her account by affiliating the VPA with an appropriate bank account held by the user. The VPA becomes the dedicated address where money can be sent or received.
Step 3: Transaction Procedure:
Ensuring a payment or transfer using UPI starts with the user giving their VPA instead of sharing bank account information. For the payer to send money, it is crucial to enter the recipient’s VPA, enter the amount, and authorise the transaction through a UPI-enabled application.
Step 4: Fund Transfer:
When using a VPA for payment, the UPI system validates it and routes the transaction to the receiver’s bank account associated with that VPA. The money is then transferred immediately from the payer’s bank account to the recipient’s.
Advantages of Using VPAs
From bustling urban centres to remote villages, VPA has become synonymous with convenient, secure, and instant money transfers. It has reshaped the financial landscape and propelled India towards a digital-first economy with an array of benefits.
Enhanced Security:
Within the UPI ecosystem, users have zero worries as transactions are completely safe, fast, and convenient. Using VPA, these users can eliminate the risks involved with sharing sensitive bank account information and stay protected from fraudulent and unauthorised transactions. Also, the extra layer of protection through UPI PIN and biometrics further protects your transactions.
Hassle-free Transactions:
When exchanging VPA transactions, you don’t necessarily have to enter the recipient’s bank particulars yourself every time. Instead, all that’s required is their VPA, and a few taps will initiate the transaction. This is convenient and time-saving, especially in cases where one needs to send money urgently. Moreover, UPI apps like Google Pay have further simplified the process by allowing the self-transfer of funds. This feature enables users to move money between their own bank accounts linked to the same VPA or different VPAs.
Simple Usability:
Users do not need advanced technical knowledge to send or receive money via VPA. UPI-enabled applications are relatively easy to use. Once one has registered on the app, money transactions are as easy as sending a message. You just need to follow the few steps mentioned earlier. In case you need extra assistance, the easy-to-use UPI apps have a simple interface to guide you through the process.
Wide Acceptance:
Various Indian banks and payment service providers enable payment transfers using VPA. Furthermore, due to the growing number of UPI users, almost everyone now has a VPA. As a result, you can effortlessly
conduct transactions with almost every merchant or peer using their VPA.
24/7 Accessibility:
Making payments whenever you want has become easier. Thanks to VPA in UPI apps, things like paying your bills, rent, and any other transaction that needs to be made instantly can easily be done because people are no longer limited to banking hours. Besides, you can make online transactions at any time of the day or night as long as you have internet access, and this is possible because of VPA.
Transaction Tracking:
With a VPA, every transaction can be tracked effortlessly within the UPI app. This includes information related to the amount sent, the date and time of the transaction, whether the payment is stuck and is still processed, and the recipient’s details, among other pertinent data.
VPA Change Option:
VPAs have the potential to be flexible, allowing users to adjust already existing VPAs or create new ones, but there are significantly restrictive factors that should be noted. Users must know that once any bank account is linked with a specific VPA, this binding becomes final and hence, cannot be changed further. Besides, to maintain and uphold system integrity, each bank account is limited to a single VPA connection, which prohibits multiple VPA assignments to the same account.
Simple To Recall:
VPAs are easier to remember than lengthy and complicated bank account numbers. Users find them secure, memorable, and, thus, user-friendly.
VPA’s Comparison with other payment methods
VPA has several essential benefits over conventional payment systems. Compared with cash, it is safer and easier to use. Card payments, on the other hand, need a physical infrastructure, in contrast to VPA. Additionally, VPAs are faster than NEFT/RTGS transfer systems and have better interoperability with mobile wallets. Notably, VPA is more user-friendly than other banking methods because it does not require account numbers or IFSC codes during transactions.
Security Aspects of VPA in UPI:
A significant concern in digital payments is security, which is addressed by UPI in different ways:
Two-factor Authentication:
UPI transactions embrace a two-factor authentication which includes a user’s mobile number and a UPI PIN.
Encryption:
Data transmitted through UPI, including VPA information, is encrypted to protect against unauthorised access.
Transaction Limits:
The National Payment Corporation of India (NPCI) has predefined the UPI transaction limit at INR 1 Lakh per day. Users can have a maximum of 20 UPI transactions per day. Nevertheless, not all banks have the same upper limit. Therefore, the upper limit could range from INR 10,000 to INR 1 lakh. Please keep in mind that the transaction limit can change periodically.
The Bottom Line
With the evolution and expansion of UPI, the VPA system is no longer limited to India. It is widely accepted by other countries, including France, the UAE, Singapore, Sri Lanka, Mauritius, Nepal, and Bhutan. Its growing global adoption serves as an inspiration for other countries looking to modernise their payment infrastructures and drive financial inclusion.
