What goes on behind the screen when you pay through UPI? | Explained
UPI enables instant bank-to-bank payments by connecting users’ apps and banks through a system operated by the National Payments Corporation of India; launched in 2016, it has grown into a massive digital payments network and is now being adopted in several countries
The Unified Payments Interface, or UPI, is India's leading digital payments system. In July 2026, it processed an astounding 2,366 crore transactions per day, totaling nearly ₹30 lakh crore. Throughout the 2025-26 financial year, UPI facilitated 24,160 crore transactions worth ₹314 lakh crore, representing 85% of digital payments by volume.
According to the International Monetary Fund, UPI also accounted for 49% of global real-time payments in 2025. Let's consider a scenario where Selvi has an account in Violin Bank and Shankar has an account in Flute Bank. If Selvi wants to send ₹100 to Shankar via UPI, she first needs to tell her UPI app, such as Google Pay or PhonePe, to whom she intends to pay.
The app doesn't comprehend names; instead, it requires an ID in a language it understands, typically in the format shankar@flutebank. This ID serves as an alias for Shankar's bank account.
When Selvi instructs her app to send money to shankar@flutebank, the app sends a payment request to the UPI system, operated by the National Payments Corporation of India (NPCI). NPCI provides the switching and routing infrastructure that connects the 730 participating banks, enabling users to transfer money between their accounts.
The UPI system will then prompt Selvi to authenticate the transaction, usually through a UPI PIN. Upon her confirmation, the transaction proceeds as follows. Selvi's bank, Violin Bank, verifies the transaction, checking if the account is valid, has sufficient funds, if the request is genuine, if the limit hasn't been exceeded, and if the transaction exhibits any signs of fraud.
If all checks pass, Violin Bank informs the UPI system that it is ready to execute the transaction. Subsequently, the UPI system routes the transaction to Flute Bank, Shankar's bank, and credits the ₹100 to the account associated with shankar@flutebank. Violin Bank then deducts ₹100 from Selvi's account, and Flute Bank adds ₹100 to Shankar's account.
Finally, Flute Bank reports the credit to the UPI system, which relays it to Violin Bank, and ultimately to Selvi's UPI app. This simplified overview captures the essence of UPI's functionality, although it overlooks the additional technical components and infrastructure that maintain its reliability and security.
Written by urgent.news from The Hindu - Sci-Tech's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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