UPI vs NEFT: An in-depth guide to the most popular payment methods in India

In recent years, the adoption of digital payments has seen a significant rise in India, with UPI and NEFT being two of the most popular payment methods. UPI (Unified Payments Interface) and NEFT (National Electronic Funds Transfer) are both used to transfer funds between bank accounts, but they have some fundamental differences. 

Let’s take a closer look at UPI vs NEFT and see how they differ in terms of usage, features, and benefits.

What is UPI?

UPI is a real-time payment system developed by the National Payments Corporation of India (NPCI) that allows users to transfer money between bank accounts instantly. The platform was launched in 2016 and has since become one of the most popular payment systems in India. UPI uses a virtual payment address (VPA) to facilitate transactions between bank accounts. Users can link multiple bank accounts to a single VPA and make transactions using their mobile phones.

What is NEFT?

NEFT is an electronic funds transfer system that enables users to transfer money between bank accounts. Unlike UPI, NEFT transactions are not instant and usually take a few hours to process. NEFT was introduced by the Reserve Bank of India (RBI) in 2005 and is widely used for making high-value transactions. NEFT transactions can be initiated through internet banking or by visiting a bank branch.

UPI vs NEFT: What’s the difference?

Speed

One of the key differences between UPI and NEFT is the speed of transactions. UPI transactions are almost instant and can be completed within seconds. NEFT transactions, on the other hand, can take 24 hours to process, with the actual transfer time depending on the time of day and the bank's processing schedule.

Transaction Limits

UPI allows users to transfer funds up to a maximum of Rs. 1 lakh per transaction, while NEFT has no upper limit on the amount that can be transferred. However, NEFT is often used for high-value transactions, and many banks impose their own limits on the amount that can be transferred in a single transaction.

Payment Method

UPI is a mobile-first payment system that can be accessed using a smartphone. Transactions can be initiated using a VPA, a mobile number, or an account number and IFSC code. NEFT, on the other hand, can be accessed using internet banking, a bank’s app or by visiting a bank branch.

Charges

Both UPI and NEFT are low-cost payment systems, with many banks offering free transactions. However, some banks may charge a nominal fee for NEFT transactions, while UPI transactions are generally free as of now.

Security

Both UPI and NEFT are secure payment systems that use encryption and other security measures to protect user data. However, UPI has some additional security features such as the ability to set transaction limits, the option to link only one bank account to a VPA, and the requirement for a UPI PIN to complete a transaction.

Which one to choose?

Both UPI and NEFT have their own advantages and disadvantages. If you need to transfer funds quickly and easily, UPI is the way to go. It is also ideal for small transactions, such as paying bills or sending money to friends and family. On the other hand, if you need to make a high-value transaction, NEFT is the better option, as it has a higher upper limit on the amount that can be transferred.

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