UPI vs NEFT – What’s best for you?

Posted on Thursday, November 24th, 2022 | By IndusInd Bank

As technology continues to evolve, we’re more reliant on digital means than ever. The onset of digital revolution in India began with the ‘Digital India’ programme, launched in July 2015. With an aim to transform India into a digitally-enabled economy, the programme focused on making technology accessible and affordable for each and every citizen of the country. 

Under this programme, on April 11, 2016, the National Payments Corporation of India (NPCI) launched the Unified Payments Interface (UPI) system. With an aim to enable seamless and faster financial transactions for all, UPI has emerged as the ambassador of financial revolution in the country. As the economy continues to recover from the effect of COVID-19 pandemic, UPI transactions have flourished. Nearly 6.28 billion UPI transactions worth Rs 10.63 trillion were recorded in July 2022 across 338 active Indian banks. Amazing, right? 

As the popularity of UPI continues to grow at a faster pace than ever, older money transfer options like National Electronics Funds Transfer (NEFT) are having a hard time retaining users. Though NEFT has gone under significant improvements over the period of time, the convenience and ease of transacting via UPI still outweigh NEFT. However, there are some areas where NEFT excels. 

What is UPI? 

UPI, or Unified Payments Interface, is a real-time payment system developed by NPCI that allows users to transfer money instantly between bank accounts using a mobile device. It works 24×7 and requires only a UPI ID or QR code—no need to remember account numbers or IFSC codes. 

UPI is widely used for peer-to-peer transfers, merchant payments, bill payments, and even investments. It’s integrated into popular apps like Google Pay, PhonePe, Paytm, and most banking apps, making it one of the most convenient ways to transact digitally. 

What is NEFT? 

NEFT, or National Electronic Funds Transfer, is a payment system that enables one-to-one transfers between bank accounts across India. It’s regulated by the Reserve Bank of India and operates in half-hourly batches throughout the day. 

Unlike UPI, NEFT is ideal for transferring larger sums and is commonly used for business transactions, salary payments, and scheduled transfers. While it’s not instant like UPI, NEFT is secure, reliable, and now available 24×7, including weekends and holidays. 

UPI vs NEFT — Detailed Comparision 

Benefits of UPI 

UPI has revolutionized digital payments in India. Here are some of its key advantages:  

• Instant transfers—money moves in real time 

• Available 24×7, including holidays 

• No need for bank details—just a UPI ID or mobile number 

• Free or minimal charges for most transactions 

• Supports small and large payments 

• Secure and encrypted transactions 

• Easy integration with mobile apps and wallets 

• Auto-pay options for recurring bills 

• Wide acceptance across merchants and platforms 

• Multiple bank accounts can be linked to one UPI ID 

Benefits of NEFT 

NEFT remains a trusted method for transferring funds, especially for larger or scheduled payments. Its benefits include: 

• Safe and regulated by RBI 

• Works across all banks in India 

• Supports high-value transactions 

• Available 24×7, including weekends 

• No need for physical cheques or demand drafts 

• Ideal for business payments and salaries 

• Can be scheduled for future dates 

• Minimal transaction charges 

• Confirmation via SMS/email 

• Widely accepted for government and institutional payments

Now, let’s learn how you can make your UPI ID and activate NEFT. 

How to Create a UPI Account? 

• Download the UPI app of your choice from Android Play store or Apple App store. 
• Sign up using the mobile number registered with your bank. 
• Link your bank account(s) by verifying the required details. 
• A unique virtual ID will be created using your mobile number which can be shared to collect money directly into your bank account. 
• You can also share your unique QR code with friends, family, or anyone to accept payments. 
• Use the scan QR feature to pay at a store/shop or to any other recipient. 
• You can also enter the recipient’s virtual ID or fetch the same by entering the recipient’s mobile number to transfer money. 
• If you are a merchant or business owner then you can also use UPI as a mode for receiving business payments. Check out the IndusInd Bank Soundbox for more details. 

Interesting Tip: A UPI transaction can be as small as Rs. 0.1 

How to Transfer Funds via NEFT? 

• Visit your bank branch to enable online banking facilities (if not activated already). 
• Once activated, log in to internet banking or mobile banking. 
• Under the ‘Fund Transfer’ tab, select NEFT option. 
• Choose a beneficiary or add new beneficiary details, including Bank Account Number, Account Holder Name, and IFSC Code. 
• Enter the amount you wish to transfer and click on ‘Submit’. 
• Complete OTP verification to complete the transaction. 

Interesting Tip: You will get a reference number upon completing the transaction. This becomes extremely useful while raising a dispute with the bank in case of delay or payment failure. 

Summing up 

Comparing UPI and NEFT side-by-side gives a clear view of why UPI system has an edge over NEFT. For most purposes, UPI transactions are quite convenient, easy, and quick. However, if you are transferring a big amount (>=Rs. 1 lakh), NEFT option is the one to go with.