UPI (Unified Payment Interface) and mobile wallets are hot terms in the market. These are used interchangeably more often than not. But are they the same? What are the similarities and differences between the two?
For example, when someone asks, ‘which app gives more cashback?’ are they asking about UPI or mobile wallet or both? Knowing the definition and purpose of each will help us understand more about how instant payments work. Let’s read more about the differences between UPI and mobile wallets.
What is UPI?
Unified Payment Interface facilitates instant payments between two bank accounts. UPI uses a virtual payment address to process the transactions and credit the amount in the beneficiary’s account. It is a platform or a means to make immediate online payments to another bank account.
What is Mobile Wallet?
A mobile wallet is also called an electronic wallet (e-wallets) or a digital wallet. It is a place to electronically store money. The mobile wallet is an intermediary between two bank accounts. Users can move their money from the bank account to a mobile wallet and vice versa. Payments made to the mobile wallet require the mobile number of the beneficiary.
Similarities and Differences between UPI and Mobile Wallet
There is no transactions fee to use UPI or mobile wallet. One of the greatest reasons for the success of the instant payments app is the lack of transaction fees. Online money transfer methods like NEFT and RTGS have a transaction fee based on the amount sent. UPI payments and mobile wallet transfers have no such fees or services charges. The platforms are fully free to use.
Users can make transfers of up to INR 1 lakh per day using the Indian UPI apps. The minimum limit is Re. 1, and the maximum limit is INR 1 lakh.
Mobile wallets have different limits for KYC-verified and non-KYC users. Users with KYC verified accounts can send up to INR 1 lakh in the mobile wallet. Non-KYC (or minimum KYC-verified) users can store up to INR 10,000 in the mobile wallet.
UPI payments can be sent to any bank account in the country. It doesn’t matter if the payment is to an individual’s saving account, a merchant’s current account or a business account.
Money transfers to other wallets, such as company wallets, depending on whether the mobile wallet is open, closed or semi-closed.
Cashback and Discounts
UPI payment apps don’t offer cashback or discounts. You can get a discount if the merchant offers you a discounted rate. There is no feature to get a discount through the app as such.
Mobile wallets offer cashback and discounts for making payments through the app. Whenever you make a transfer through the app, you are automatically credited with the cashback amount. You can apply discount codes to get discounts on mobile wallet payments.
The main purpose of UPI and mobile wallets is to facilitate online money transfer. However, UPI can also manage future transactions. The mobile wallet works only for immediate transactions.
PoS (Point of Sale) Payments
Indian UPI apps are so popular because they allow you to make payments in the stores. You are required to open the app and scan the QR code of the merchant. Then send money from your bank account to the merchant’s account.
There are very few stores that accept PoS payments through mobile wallets. The merchant needs to have a mobile wallet on the same app/platform to accept money from your e-wallet.
UPI apps allow you to request payment from the customer. This feature lets you remind the customer about the payment. When a customer accepts the request, a message will be sent to their bank. Your bank account will be credited with the funds.
Only a few mobile wallets have this feature. However, since many UPI apps also have mobile wallets, the feature is commonly found in the market.
Apps like PayTM, PhoenPe, Fave, etc., offer mobile wallets and a unified payment interface to facilitate transactions between bank accounts and e-wallets. The apps now offer cross-platform payments to increase the convenience of cashless payments.