Advantages and Disadvantages of UPI Payments While Using for Money Transfer
UPI has turned every smartphone into a tiny bank branch, letting millions of Indians send or receive money with a single tap. But just like any tool, it comes with both pros and cons. This guide looks at the advantages and disadvantages of UPI so you can decide when to tap Pay and when to choose something else.
Top Advantages of Using UPI for Money Transfer
Why do we keep raving about Unified Payments Interface? The next list shows the everyday perks that make it a household favourite.
- Instant, 24×7 payments: Money lands in the other account within seconds, even on Sundays and holidays.
- Zero fees for most users: You and the receiver keep the full amount; that’s one of the biggest benefits of UPI payment.
- One app, many accounts: Link several bank accounts and swap them at checkout. This is handy if salary comes into one bank and bills go out of another.
- No paperwork: All you need is a phone number, a VPA, and your UPI PIN.
- Accepted (almost) everywhere: From roadside chai stalls to online megastores, advantages of UPI payment include national acceptance.
Together, these points highlight the core advantages of UPI over money transfer methods like NEFT for small, everyday sums.
Top Disadvantages of Using UPI for Money Transfer
UPI is a great tool, but it also has a few drawbacks. Knowing the downsides will help you avoid any surprises later:
- Daily limits: Most banks cap UPI transfers at ₹1 – ₹2 lakh per day.
- Internet and battery dependence: No data or a dead phone means no payment.
- Wrong VPA, money gone: Transfers are real-time; a typo can cost you a lot.
- Bank or app downtime: No payment if the PSP or your bank server is down.
- Fraud risk: Scammers send fake payment requests. If you click on fraud requests, it can lead to losses.
So, whenever you’re moving a big amount or need the money to arrive without fail, remember these UPI drawbacks and consider safer alternatives like NEFT or RTGS.
Comparison: UPI vs Other Digital Payment Methods (NEFT, IMPS, Wallets)
Ever paid your local fruit vendor with a quick QR scan or split the dinner bill in seconds on your phone? That’s UPI at work. But UPI isn’t the only way to move money. Options like NEFT, IMPS, and e-wallets still matter. Let’s break down how these payment rails compare so you can pick the right one as per your requirements.
Factors | UPI | NEFT | IMPS | Wallets (Paytm, PhonePe, etc.) |
How fast is it? | A few seconds | 30 min – 2 hrs (often faster) | A few seconds | Instant wallet-to-wallet; bank transfer may take hours |
What will it cost me? | Usually ₹0 | ₹0 – ₹15 per transfer (bank decides) | ₹0 – ₹5 (small fee for some banks) | Loading wallet from bank can cost up to 2 %, but wallet-to-wallet is free |
Is it open 24×7? | Yes, even on holidays | Yes (24×7 since Dec 2019) | Yes | Yes |
How much can I send? | ₹1–2 lakh per day (bank sets exact limit) | No hard RBI cap; bank may set its own high limit | ₹2 lakh per transfer | Regulated by wallet KYC level (₹10,000–2 lakh) |
Do I need bank details of the receiver? | No. Just a UPI ID or QR code | Yes. Account number + IFSC | Yes. Account number + IFSC | No. Only phone/wallet ID |
Works without internet? | Limited – UPI 123PAY (*99#) for feature phones | SMS-based option via bank | SMS option via bank | Mostly no |
Typical use case | Everyday spends, bill splits, small business sales | Large payments, salary credit, bulk transfers | Emergency bank transfers, instant refunds | Small online purchases, cashback offers |
Key plus point | Fast & free | Higher limits, reliable for big sums | Speed with bank rails | Loyalty points & offers |
Main drawback | Daily cap & relies on data | Slower than UPI for small amounts | Lower limit than NEFT | Extra step to move money to bank |
For quick, low-value transfers, the advantages of UPI over money transfer modes like NEFT stand out; for high-value or corporate payments, NEFT or RTGS may fit better.
When Should You Use UPI for Transfers?
Here’s our guide on which payment method is best for which type of payment:
Situation | Best Choice | Why this option is best |
Need to send up to ₹1 lakh right now (split dinner bill, pay a handyman, order medicines) | UPI | It settles in seconds, costs nothing, and only needs a QR code or UPI ID. A perfect option when speed and simplicity matter most. |
Moving more than ₹2 lakh or paying many people at once (vendor invoices, salary batch, property token) | NEFT or RTGS | These rails have higher daily caps, let you schedule payments, and still reach the recipient’s bank on the same day, avoiding UPI’s limit. |
Poor or no mobile data (rural zone, basement shop, phone on low-battery mode) | IMPS via SMS or cash | IMPS text commands work with just a basic cellular signal; if even that’s unavailable, cash is the fail-safe that never needs connectivity. |
Also Read: Personal Loan Balance Transfer – Check Interest Rate
Tips for Secure UPI Transactions
UPI is built with strong security rails, but a few smart habits keep you extra-safe from scams and typos. Follow these pointers every time you tap ‘Pay’ or ‘Collect’.
Tip | Why it helps you stay safe |
Always confirm the receiver’s name and VPA | A quick glance stops you from sending money to a look-alike ID or falling for a cleverly misspelt handle. |
Keep your UPI PIN and OTP secret, no exceptions | Bank staff, delivery agents, and “refund” callers will never need your PIN |
Delete payment links or “collect” requests from strangers | Scammers often send urgent-looking links that flip roles: you think you’re getting money, but you end up authorising a debit. |
Update your UPI app and phone OS regularly | Updates patch loopholes and adds new fraud-detection checks, keeping you ahead of hackers. |
Lock the app with fingerprint or face ID | If your phone is lost, thieves can’t open the UPI app without your biometrics, adding another wall of protection. |
Turn on instant SMS or app alerts | Real-time notifications let you spot and report any unauthorised debit within minutes. |
Set lower per-transaction limits (if your app allows) | Capping each payment reduces potential loss if your account is ever compromised. |
Use UPI Lite for small, everyday spends | Lite keeps only a small balance on the device, so even if someone gains access, the risk is minimal. |
Future of UPI: New Features and Expanding Usage
Imagine paying for chai by just saying “Hey UPI, ₹25 to Raj,” or tapping your phone on a bus conductor’s badge. No data or PIN will be needed. That feature is already rolling out, and it’s set to make UPI even more indispensable.
What’s New on the Tech Side?
- Credit Line on UPI: Banks can now pre-approve a small line of credit that works exactly like a bank account inside your UPI app. You scan a QR code, pick “Credit Line,” and the amount is auto-debited on EMI terms, which is perfect for end-of-month crunches.
- UPI Lite X & Tap-n-Pay: These offline and NFC modes let you pay up to ₹500 even when your phone has no signal, ideal for metros, buses, or rural fairs.
- “Hello! UPI” voice payments: Conversational AI lets you send money in Hindi, Marathi, or English through a simple voice prompt, lowering the learning curve for less tech-savvy users.
Where Will You Be Able to Use It?
UPI’s passport is getting busier. The PayNow linkage with Singapore just added 13 more Indian banks, making cross-border remittances nearly as quick as a local transfer.
NPCI’s international arm also plans to light up terminals in Qatar, Thailand, and several EU nations by the end of 2025, following pilots in France and Cyprus.
Why It Matters for Everyday Indians
- Seamless micro-credit: Swipe now, slice later without new apps or paperwork.
- Offline reliability: Pay even in no-network zones, keeping small businesses in the loop.
- Global travel freedom: Use the same QR habit from Mumbai street food stalls to a café in Singapore or Paris.
- Voice accessibility: Elderly parents or first-time smartphone users can simply speak to pay, boosting digital inclusion.
In short, UPI is evolving from a quick-pay tool into a full-stack payments ecosystem where credit card, wallet, and global remittance channels are rolled into one.
Conclusion
Think of UPI as your lightning-fast wallet that’s welcome almost everywhere, adding to the undeniable benefits of UPI. Still, keep an eye on daily limits, sporadic downtime, and those pesky fraud attempts that come under the disadvantages of UPI. By weighing the advantages and disadvantages of UPI, you can decide when to stick with a quick scan and when to pull out a card or net-banking instead. Enable transaction alerts, guard your PIN, and you’re all set for smooth, secure payments.
Frequently Asked Questions
What Are The Main Benefits Of Using UPI For Money Transfers?
UPI gives you real-time, 24×7 transfers with zero fees, one-tap QR payments, and instant bill splits, all from a single virtual ID.
Are There Any Risks Or Disadvantages Of Using UPI?
Phishing links, fake QR codes, daily transaction caps, and occasional server downtime can trip you up.
How Does UPI Compare With NEFT And IMPS?
Unlike NEFT’s batch processing and IMPS’s bank-specific charges, UPI is free, works around the clock, and needs only a VPA instead of lengthy account details.
Is UPI Safe For High-Value Transactions?
Yes. UPI uses two-factor authentication, device binding, and end-to-end encryption; banks also cap limits (often ₹1–2 lakh/day) to curb fraud.
What Should I Do If My UPI Transaction Fails?
Most failed transfers auto-reverse within the next 2 working days; simply check your bank SMS and dashboard for updates. If money isn’t back in 24 hours, raise a dispute via the website/ app or contact your bank with the UTR reference.
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