What is VPA in UPI?

In the dynamic landscape of digital finance, the Virtual Payment Address, or VPA, has emerged as a game-changer. VPA offers a seamless, secure, and simplified way to transact in the modern era. It has revolutionised the digital fund transfer facility by providing a unique identifier that serves as the identity of the payer and the receiver during online money transfers.

VPA stands for virtual payment address. It is like an email address. When you want to send someone an email, you ask for their email address. Similarly, you will need a VPA address when you want to send payments to the beneficiary without remembering their account number or IFSC code. Let us understand what a virtual payment address is, its benefits, and how it works.

What does a Virtual Payment Address mean in UPI?
 

A few years back, having the beneficiary's account number, IFSC code, etc., was necessary to send money. However, the Unified Payments Interface (UPI) changed that, allowing you to send anyone money instantly without entering the beneficiary's account details.

Instead of typing in the bank account details, you can enter their VPA, and the funds will be credited instantly without transaction charges. It also makes it easier for merchants to collect payments from their customers online.

How VPA works?
 

Here is a detailed guide on how the Virtual Payment Address works.

• VPA creation

To create a VPA in UPI, you first need to download a UPI-enabled banking app. Within the app, select the option to create a VPA. You can choose a unique username, which will become your VPA (e.g.,yourname@bankname). After verifying your identity and linking your bank account, your VPA is generated, allowing you to send and receive funds securely.

• Linking bank account

To link your bank account, provide the necessary details such as account number and mobile number. The app will verify your information and associate your chosen VPA with your bank account, ensuring a seamless connection for transactions.

• Transaction process

Initiating a transaction involves entering the recipient's VPA instead of account details. The UPI system uses this VPA to identify the recipient's bank account securely. You can then specify the amount and purpose of the transaction before confirming it with a UPI PIN for authentication.

• Fund transfer

Once the transaction is confirmed, funds are securely transferred between the linked bank accounts. The recipient's bank receives the request, validates it, and processes the transfer. As you can see, there is no need to enter the bank account details of either you or the recipient to make transfers. This method ensures privacy, convenience, and swift fund transfers, making UPI with VPA a preferred choice for digital payments in India .

How to get a VPA for your bank account?

Creating a VPA for your bank account is easy. First, you need to visit your preferred UPI app. For instance, if you are an IDFC FIRST Bank customer, open the IDFC FIRST Bank mobile banking app. Once you have opened the app, click on the Create VPA option and follow the outlined steps. Keep your debit card details handy as you will need them during the process.

Why should you get a Virtual Payment Address?

A VPA is essential for the following reasons.

• You can instantly send and receive money anytime, even on bank holidays. It is a unique feature that sets UPI apart from the other transaction methods in the country.
• You do not need to add any beneficiary and wait for it to get approved. You can send money directly to any VPA address.
• You do not need to remember anyone's bank account number or IFSC code. VPA makes money transfers quick and straightforward.

Benefits of VPA
 

VPA offers numerous benefits, revolutionising the way people conduct digital transactions in India:

1. Simplified transactions:|
   
   

   VPAs simplify the payment process by eliminating the need to remember complex bank account numbers and IFSC codes. You can make payments using a simple and memorable VPA, which is usually the receiver’s mobile number, reducing the chances of errors during transfers.
   
   

2. Enhanced privacy:
   
   

   VPAs protect your sensitive bank account information. When you share your VPA for transactions, your actual bank account details remain confidential, reducing the risk of fraud or misuse.
   
   

3. Interoperability:
   
   

   VPAs are not restricted to a single bank or payment service. They work across various banks and UPI-enabled apps, promoting interoperability and allowing users to choose their preferred banking provider.
   
   

4. Instant fund transfer:
   
   

   With VPAs, funds are transferred instantly, facilitating quicker payments and settlements. This speed is crucial for businesses that rely on timely transactions.
   
   

5. Convenient for e-commerce:
   
   

   VPAs make it easy to shop online thanks to its hassle-free and secure payment mechanism. They streamline the checkout process, enhancing the overall online shopping experience.
   
   

6. Reduced costs:
   
   

   Traditional banking transactions often involve fees and charges. VPAs, being a part of the UPI system, typically have lower transaction costs, making them a cost-effective choice for both businesses and individuals.

How to send money to a VPA account?

Follow the below steps to send money to a VPA account.

• Open your preferred UPI app.
• Select the send money option.
• Enter the beneficiary's VPA. Alternatively, if your beneficiary is registered with the same UPI app, you can enter their mobile number.
• You will be asked to enter your UPI ID in the next step. Enter the same and confirm.
• If the transaction is successful, the money will instantly reach the beneficiary's bank account.

However, if the transaction fails, you contact the bank for assistance. In most cases, the money is refunded back to your account.

Disadvantages of UPI

UPI offers many features but sending and receiving money through UPI also has some drawbacks. Here are two of its common issues.

• There are transaction limits for UPI. You can only send up to ₹1 lakh per day, which is not ideal for businesses dealing in big transactions.
• If the bank's UPI system is down, your payment can get stuck, and you might need to wait for up to 48 hours to get your refund.

However, despite its shortcomings, UPI remains the most convenient option to send and receive money, with VPA being the best option for sharing your bank account details.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank 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 mentioned. Please consult your financial advisor before making any financial decision.