Setting Up Digital Wallets and UPI: What You Need to Know

Unified Payments Interface (UPI) and digital wallets, popularly known as mobile wallets, have significantly helped India leap from the age-old concept of cash transactions to a digital economy. The two tools have revolutionised the concept of payments making it faster, easier and more convenient for all.

Whether you are buying at a mall or a local shop, you can use digital methods to make payments anywhere in India.

Here’s a quick guide to setting up digital wallets and using UPI for seamless transactions through your smartphone.

Digital wallet

Also referred to as e-wallet, is the digital version of a physical wallet, allowing users to carry money without the requirement of cash. Users can make payments directly through a smartphone using a digital wallet.

All you need to do is link a bank account with a digital wallet and add money to it. Digital wallets securely save all your payment information and give an easy and quick option to transfer money.

Apart from storing the payment information in the cloud securely, digital wallets offer key features like face ID and touch ID along with multi-factor authentication options, reducing the risk of fraud significantly.

How to set up a digital wallet?

Step 1. Open the App Store on your iPhone or the Google Play Store on Android devices.

Step 2. In the search menu, look for the digital wallet app of your choice and download it.

Step 3. Open the app and follow instructions carefully.

Step 4. New users are typically asked to add card details for the first time to use the app.

Step 5. Authorise payment method with a fingerprint, passcode, or facial recognition.

Unified Payments Interface (UPI)

Developed by the National Payments Corporation of India (NPCI), UPI is a real-time payment system that allows users to link different bank accounts into one mobile application. Users have the option of transferring money between multiple bank accounts through their smartphones. This system works on a unique Virtual Payment Address (VPA) that facilitates transactions without any requirement for bank details.

It allows users to generate bank statements, check account balances, and pay bills through a highly secure platform that features end-to-end encryption and two-factor authentication for enhanced protection.

Setting up UPI

1. Choose UPI App: Download the UPI app of your choice from the App Store or Google Play Store.
2. Registration: Open the app and register yourself by entering details like name, virtual id (payment address), password etc. Also, you need to provide a mobile number linked to your bank account.
3. Generating UPI: Users are required to create a UPI ID and select the bank account to initiate the transaction.
4. Link Bank Account: Select the bank from the available list. Your details will be automatically taken from your bank account linked to your registered mobile number.
5. UPI Pin: Set up your UPI PIN that will be required for authorising transactions.

Difference between UPI and digital wallets

1. Digital wallets act like intermediaries between your bank accounts, while UPI transactions are direct bank-to-bank transfers.
2. UPI doesn't require users to store money separately unlike digital wallets where the money is added to the e-wallets.
3. Mobile wallets are considered a convenient option for small transactions and UPI is preferred for direct bank transfers and managing multiple bank accounts in one app.
4. UPI ID is directly linked to multiple bank accounts. On the other hand, mobile wallets can operate independently.
5. The standard UPI transaction limit for peer-to-peer payments is Rs.1 lakh, while for digital wallets, the transaction is limited to Rs.10,000 per month for non-KYC customers.

Setting up UPI and digital wallets on your smartphones is an easy and transparent process which goes on to significantly enhance the security and convenience of financial transactions. Users get to pay bills and enjoy a cashless experience with a few taps on the phone.

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.