January 7, 2025 · 11 mins read
Santosh Kumar
A development in the world of digital payment is the Unified Payments Interface (UPI). Using it, a user can transfer and receive money instantaneously to where they are when he/she holds their mobile phone, having no physical cash or card read. As the UPI service is pushed to more and more users, including various stakeholders, concerted efforts are being made to maintain the optimal functioning of the payment system. One such stakeholder is the PSP (Payment Service Provider). Here, we shall describe what PSP is in UPI, its functions, how it works, and how companies or people can participate via PSP registration with UPI.
PSP stands for Payment Service Provider. It is an independent third-party organisation that provides digital payments between banks and end users. PSPs offer a portal for UPI services, allowing users to perform art transactions, execute payments, and even incorporate UPI into other services.
In the context of UPI, a PSP acts as an intermediary between the user (payer or receiver) and their bank, ensuring the payment is processed smoothly. Although the bank manages the actual account, the PSP offers the platform or application with which the users communicate with UPI. Examples of PSPs include, e.g., platforms including Google Pay, PhonePe, Paytm,, and other mobile wallets with UPI capability.
The role of PSPs in UPI is particularly relevant to determining the operational stability of the payment system. Following is an augmented view of the different functions they perform:
Gateway to UPI: A PSP offers the required network and software for UPI payment transactions. On the other hand, if you are paying with Google Pay or any such PhonePe, they are the PSPs through which you can make the payment by UPI without having to interface with a bank.
Payment Processing: If you slide a UPI payment down the platform, the PSP asks for its payment to the bank, and the bank further asks whether there is enough balance in your bank to submit the transaction. Once confirmed, the bank returns to the PSP a response, and the transaction is finalised.
Security and Encryption: PSPs are responsible for ensuring that transactions are secure. They also encrypt your data (e.g., your UPI ID and PIN) to secure your financial information during transmission.
Customer Support: PSPs offer customer support services to address UPI transaction-related problems such as failed transactions, wrong transfers, technical troubles, etc.
Innovation and Features: PSPs are always progressing, and they are continually incorporating new and innovative features into their applications aimed at creating an improved experience for the end user. For instance, they merge surcharge transactions and so on, like the refill, a loan, and so on, which can be checked on their UPI platform directly.
Merchant Solutions: PSPs also offer UPI solutions for merchants. Business payments can now be processed directly from customers using UPI QR codes, which avoids the need for a traditional Point of Sale (POS) machine. This has also dramatically alleviated stress for small businesses or vendors regarding payment.
Read More:: How to Check CIBIL Score Without Mobile Number
Multiple PSPs are found in the UPI ecosystem. They can be categorised as follows:
Bank PSPs: These are banks that act as payment service providers. They provide UPI to their customers and also support customers in connecting their bank saccounts to the UPI system. The use of Bank P2P, in particular, is exemplified by the examples of SBI UPI, HDFC UPI,, and ICICI UPI.
Non-Bank PSPs: These are third-party apps and digital wallets providing UPI services. These web/app spaces allow users to pay using UPI without directly having a bank account tied to the app. Popular examples include Google Pay, PhonePe, Paytm, and MobiKwik.
UPI Merchants: Merchants are also PSPs in that they can receive UPI payments through apps such as Paytm or PhonePe. These companies leverage PSPs to enable UPI to be accessed by their customers.
Read More:: How to Do Offline UPI Payment
For an insight into the process, let us divide it into a few easy steps. Latencies in the transaction using UPI via a PSP:
Initiation: The user navigates to the UPI-based application (a PSP) (e.g., PhonePe or Google Pay) and enters the payment details (such as the payment recipient's UPI ID).
Authentication: Once the information is written, the payment is authenticated by the user through the UPI PIN. In this pin is offered to the user for transaction authentication.
Payment Request: The PSP further has the ability to transmit to the user's bank account a query. In the certification about the possibility of performing the transaction necessarily due to the balance of the user, the bank is responsible.
Transaction Response: The transactions are settled by the bank that, after deducing the amount from the payer account, returns the answer to the PSP.
Completion: At last, the PSP not only alerts the sender and recipient of the conclusion of the transaction, but that the money is now to be moved to the recipient.
Therefore, the PSP guarantees the successful transaction execution by connecting the accounts of the entities and by managing the process of the transaction.
Read More:: What is UPI Reference Number?
If you are a business or a developer who is looking at setting up UPI payments for your customers, you may wonder how to register PSP in UPI. Here's a basic outline of the process:
As a first step to registering with the point of service provider (PSP) for UPI, an associate needs to get in contact with a bank or the already running non-bank PSP. The bank will assist in facilitating the UPI integration.
To operate after forming a partnership with a bank or PSP, the UPI Merchant ID must be acquired. This ID is a unique identifier that helps process UPI transactions.
When you are provided with the Merchant ID, you will then be required to incorporate UPI APIs into your business's payment gateway. Through these APIs you can integrate your website, mobile application, or online store with the UPI ecosystem and enjoy frictionless payments for the same.
For UPI service to be enabled, the National Payments Corporation of India (NPCI) regulatory provisions need to be complied with. Validation will also be required,, and the required documentation will need to be provided.
Prior to launch, perform comprehensive testing to ensure that your UPI payment system is operating as it should. This testing consists of a UPI link test, a QR code test, and a payment flow test.
As the system is already live and in operation, your UPI payment system can be made available to you. At present, platform users have the ability to construct a UPI, and your platform, therefore, will be able to start a payment into a bank account.
Read More:: How to Change UPI PIN in Google Pay
Although it is not hard to register PSP (UPI), the following.
KYC Verification: As a PSP, you will be required to perform accurate KYC (Know Your Customer) verifications of individuals (customers) and entities (merchants) to prevent fraud and comply with the applicable legal requirements.
Transaction Limits: UPI payments have transaction limits, particularly when not dealing with merchants or businesses. Also, these limitations should be considered when designing the UPI system.
Security Protocols: Transactions processed by UPI include sensitive financial information, and accordingly, as a PSP, it is of the utmost importance to comply with robust security measures. This includes encryption, multi-factor authentication, and fraud detection systems.
Integration with Payment Gateway: During the setup of a payment gateway, embedding the system in a number of channels, including website platforms, mobile applications, and point of sale (POS) systems, would be necessary for making UPI payments.
User Experience: For instance, the success of your UPI integration, such as, is ultimately the user experience. Your interface is simple to use, secure, and customer-friendly.
Read More:: How to Reset UPI PIN
Wide Reach: PSPs open the gate to millions of users, which is why corporations and individuals can easily make UPI transactions.
Faster Payments: UPI provides immediate payments, which greatly benefits firms and customers. Payments can be completed 24/7 without delays.
Cost-Effective: UPI transactions (as a whole) do not involve a charge, or the charge is negligible; therefore, it is a cheap payment method compared, for example, to using a credit card.
Security: Because of the multilayered encryption and authentication, UPI transactions are very secure. PSPs also implement additional security measures to safeguard data.
Scalability: Whether you're a small business or a large enterprise, UPI offers scalability. PSPs are readily able to expand the payment system whenever there is an increase in transaction numbers.
By leveraging PSPs, UPI has revolutionised digital transactions, making them quicker, more secure, and widely accessible to users.
Read More:: How to Reset UPI PIN on PhonePe
PSP (Payment Service Provider) is the engine of the UPI ecosystem and acts as a user and bank-to-user interface for effective financial processing. Whether you're a business looking to enable UPI payments or an individual interested in using a PSP app, understanding the role of PSP in UPI is essential. To apply UPI within a company's system, PSP registration for UPI is used, which, by doing so, can aim to shorten, safeguard, and enhance payments.
Due to its easy-to-use interface and secure transactions, UPI is currently one of the most popular mediums of money transactions, and PSPs are still largely responsible for its popularity and further development mode in India.
What is the difference between a PSP and a bank in the context of UPI?
A PSP (Payment Service Provider) is a third party intermediation layer between the users and their respective banks to carry out the UPI transaction cycle. However, subject accounts and money in the transactions belong to the institutions (banks). PSPs offer a convenient platform for UPI payments, whereas UPI payment infrastructure is controlled by banks.
Do I need to register with a specific PSP to use UPI?
No, you do not have to register any dedicated PSP for UPI. You are free to choose amongst a number of UPI-supported apps provided by various PSPs (e.g., Google Pay, PhonePe, Paytm, etc.). Just download one of these apps, pair it with your bank, and you are good to go with UPI support.
Can a PSP charge fees for using UPI services?
In general, transaction costs are free for both sides of UPI. However, for a PSP to charge subscription fees for services or functions (such as integration, limit-line subscription, or big transaction functionality), etc. Do not spam the designer with different versions of the same prompt since they must ensure that the conditions under which the PSP is performed are not some hidden cost.
Am I allowed to use a PSP to transfer money to all people who do not have a UPI-enabled app?
No, UPI-based money transfer with a PSP is only possible if both sender and receiver have UPI-enabled apps or accounts. When the recipient does not have a a UPI ID, other payment channels, such as bank transfers or digital wallet channels, need to be utilised, which are not directly linked to UPI ID.
Are PSPs regulated by any financial authority?
Yes, PSPs are subject to a range of legal and regulatory provisions as prescribed by RBI and NPCI. They are required to maintain customer data confidentiality, keep abreast of data protection legislation, and have an anti-money laundering (AML) scheme. At the same time, they must clearly define KYC (Know Your Customer), which they will adopt to carry out services to users and merchants.
Can I use multiple PSPs for UPI payments?
Yes, you can use multiple PSPs for UPI payments. For instance, an app module of Google Pay, PhonePe, and Paytm apps based on the same linked bank account is also viable. You are free to move between PSPs; however, in each PSP that you previously interacted with, you will be required to set up and verify/authenticate your UPI ID.
Download the app now
Download the app from PlayStore
