UPI vs Digital Wallet: What’s the Difference?

In today's digital age, people don't like to carry cash. Now everything has become online - whether it is shopping, paying bills or transferring money. The two most popular digital payment options in India are UPI (Unified Payments Interface) and Digital Wallet. Many
people consider these two to be the same, but in reality their working method, features and benefits are different. In this blog, we will learn in detail what UPI and digital wallet are, how they work, and what are the main differences between them.

What is UPI?
The full form of UPI is Unified Payments Interface. It was launched by NPCI (National Payments Corporation of India) in 2016. UPI is a system through which you can transfer money directly from your bank account to another person's bank account - that too without entering IFSC code, account number, just by mobile number or UPI ID.

Main advantages of UPI:

  • Send or receive money directly from your bank

  • Real-time transactions

  • Available 24x7

  • No need to keep money in wallet

  • Secure transactions with UPI PIN

  • Works with many apps like BHIM, Google Pay, PhonePe, Paytm

What is a Digital Wallet?
A digital wallet is a virtual purse in which you first load money and then use that money. It is a kind of prepaid system. You add money to the wallet from your debit or credit card or net banking and then do shopping, bill payment, recharge etc. from the same wallet.

Main advantages of digital wallet:

  • Very convenient for small payments

  • QR code payment in offline stores

  • Cashback, offers and rewards are available in many wallet apps

  • Easy to pay electricity, water, mobile bills

  • Useful for ticket booking, online shopping, gaming

What is the difference between UPI and Digital Wallet?
Now let's talk about the basic difference between these two. The biggest difference is that UPI transfers money directly from the bank, while in a digital wallet, money has to be added first and then payment is made from that money.

There is no wallet balance in UPI, the amount you want to pay is directly deducted from your bank account. However, money is already kept in the wallet and the expenses are made from there.

The second big difference is that you can link UPI to any bank account and there is no hassle of adding money to it. But in a digital wallet, money has to be added again and again.

Thirdly, with UPI you can transfer larger amounts (up to ₹1 lakh or ₹2 lakh, depending on the app), while digital wallets usually have a limit of ₹10,000 only (without KYC).

When to use UPI?

  • When you want to send money directly to someone's bank account

  • When you have to transact a large amount

  • When you want to avoid the hassle of adding money again and again

  • When you need fast and free transactions

When to use Digital Wallet?

  • When you want to keep money in the app for small expenses

  • When you want to avail offers, cashback and rewards

  • When you want to make quick payments even on slow internet

  • When you make payments at the same store repeatedly

Can both be used together?
Yes, you can use both UPI and Digital Wallet in the same mobile. Nowadays apps like Paytm, PhonePe and Amazon Pay offer both the facilities – you can use wallet as well as UPI.

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Future of UPI and digital wallet
Digital payment is growing very fast in India. UPI is now being started in foreign countries as well. Making payment by scanning QR code has now become common. In the coming time, both UPI and digital wallet will become stronger and more convenient.

The government is also promoting UPI as it is a big step towards a fast, secure and cashless economy. At the same time, digital wallet companies are bringing new offers and services to keep the users connected.

Conclusion
UPI and Digital Wallet both have their own importance. If you want to make payment directly from the bank then UPI is better. If you want offers and quick payment then digital wallet is a good option.
The smart way is to use both in a balanced and right way - UPI where it is necessary and digital wallet where it is convenient.

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