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As between the two financial institutions and their respective customers, they will typically settle by debiting and crediting their respective customers' accounts they maintain.

Steps for Registration: User downloads the UPI application from the App Store/Banks website. User creates his/her profile by entering details like name, virtual id (payment address), password etc. User goes to ?Add/Link/Manage Bank Account? option and links the bank and account number with the virtual id.

Also referred to as wire transfers, a simple cross border transaction using accounts held at each bank would involve a payment message sending an instruction to debit an account in Bank A and credit an account in Bank B.

Payment settlement involves collecting the funds for the amount recorded for an order. For example, when using credit cards, the settlement process specifically involves contacting the payment system and collecting the required amount of funds against the credit card.

An ACH transfer is the electronic movement of money between banks through the Automated Clearing House network. ACH transfers include external funds transfers, person-to-person payments, bill payments and direct deposits from employers and government benefit programs. Business-to-business payments are another example.

The acquiring bank, or receiver's bank, receives the transaction amount and credits it to the payee's account. The UPI server sends a response to the customer's app, confirming the successful transaction and providing a reference ID.

The sending bank removes money from the sender's bank account, clearing the transaction. It's not until after the receiving bank puts forth the funds, both institutions settle the payment, and the banks exchange capital that the process ends.