UPI vs BHIM: Understanding the core differences in India's digital payment platforms

UPI acts as a comprehensive payment system that facilitates smooth interbank transactions. On the other hand, BHIM is a specific app designed to leverage the features of UPI, with a particular focus on accessibility and simplicity. So, what makes these two unique, and how do they collaborate within India’s digital payment ecosystem?

What is UPI?

UPI, created by the National Payments Corporation of India (NPCI), transforms interbank transactions by offering a real-time payment system. It integrates merchant payments, smooth fund routing, and various banking functions onto a single platform. Here's how it stands out:

• Interoperability: You can connect multiple bank accounts to a single mobile application, regardless of the bank. This compatibility marks a significant advancement over traditional banking apps that restrict usage to specific institutions.
• Smooth Transactions: UPI allows you to send money using Virtual Payment Addresses (VPAs), eliminating the need for bank details. This makes transactions safer and more straightforward.
• 24/7 Availability: You can carry out UPI transactions 24/7, including weekends and holidays, unlike traditional banking systems that operate only during regular business hours.
• Security: UPI transactions use two-factor authentication, ensuring robust security for users. This means you need to verify your identity with the UPI PIN as well as the phone to complete a transaction, adding an extra layer of protection against unauthorised access.
• Integration: It integrates into numerous apps, including Google Pay, PhonePe, and Paytm, making it widely available and adaptable.

What is BHIM?

BHIM is a UPI-enabled digital payment app for online transactions. The Indian government released BHIM, created by NPCI, in December 2016 to promote digital transactions via mobile devices. Here’s what it offers:

• User-Friendly Interface: BHIM’s simple design targets users who might not be familiar with technology. Its clear layout and basic functions make it easy to use and understand.
• Support for UPI: Since BHIM is based on the UPI platform, it supports all UPI features. You can transfer money, check balances, and pay merchants using your UPI ID.
• Government Initiative: BHIM enjoys trust and legitimacy among users, especially those unfamiliar with digital payments, due to its government backing.
• Rewards and Incentives: The government has offered incentives and rewards to encourage the use of BHIM, promoting its widespread adoption.
• Language Support: It supports multiple Indian languages, catering to India’s diverse linguistic population. This makes it easy for the users to navigate through the app in their preferred language.

UPI vs BHIM

Although the two are linked and people frequently use them interchangeably, they differ significantly in several ways:

• Nature and Scope : UPI is a payment mechanism and platform that enables a variety of mobile applications to conduct transactions across bank accounts. In contrast, BHIM is an app that provides its services over the UPI platform, alongside other apps using UPI for transactions.
• Ecosystem of Applications : UPI supports a range of applications, such as Google Pay, PhonePe, and Paytm, which offer additional features like bill payments and mobile recharges. While BHIM offers all UPI capabilities, it prioritises simplicity and direct government support as a standalone app.
• User Interface and Experience : UPI-based apps cater to a wide range of user preferences, offering varying user experiences from highly interactive interfaces to simple transaction capabilities. BHIM, focusing on simplicity and usability, provides a basic interface ideal for novice users or those with limited technological experience.
• Promotion and Trust : NPCI supports UPI and integrates it into numerous commercial sector apps, deriving its legitimacy from widespread use and acceptance. The government actively promotes BHIM, lending it additional credibility, especially among users who trust government-endorsed products.
• Functions : UPI-based apps typically offer additional features such as credit facilities, investment options, and personalised offers, enhancing user engagement beyond simple transactions. BHIM primarily focuses on popularising and facilitating online payment services. Its main aim is to make every digital payment a smooth and easy one for its users.

Conclusion

UPI and BHIM serve distinct roles in India’s digital payment ecosystem. The functions they perform and the user experiences they provide set them apart. UPI acts as the flexible backbone of digital payments, while BHIM is a specialised app that promotes UPI use with an easy-to-use interface. Together, they represent a dual approach to fostering a digital economy: a robust technological foundation coupled with accessible and reliable user applications.

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