In India’s changing digital payments landscape, UPI (Unified Payments Interface) has become essential for real-time transactions. For businesses and banks establishing payment systems, two key terms often arise: UPI payment gateway and UPI API. Although they seem similar, they have very different functions. A UPI payment gateway is the secure system that processes UPI transactions on a large scale, while a UPI API is the integration layer that connects enterprise systems to that gateway. Castler provides a unified solution that combines both capabilities, helping organizations accept, manage, and scale UPI payments effectively.

In this blog, we’ll clarify what a UPI payment gateway is, how it differs from a UPI API, why both are important, and how Castler’s solution supports both aspects. For business and tech leaders, grasping this distinction is crucial for creating future-ready payment systems.

Understanding UPI: A Quick Primer

Before diving into gateways and APIs, it’s helpful to revisit what UPI actually is. UPI is an instant payment system developed and operated by NPCI (National Payments Corporation of India). It allows users to send and receive money between bank accounts 24/7 using a virtual payment address (VPA) or UPI ID. It supports peer-to-peer (P2P) transfers, merchant payments, and more. NPCI sets the rules, message formats, and transaction workflows for UPI. Every UPI transaction goes through NPCI’s core switching system, which manages authentication, validation, clearing, and settlement between banks.

What Is a UPI Payment Gateway?

At its core, a UPI payment gateway is the infrastructure that enables merchants and service providers to accept UPI payments in a secure and scalable way.

Role & Functionality of a UPI Payment Gateway

A payment gateway serves as the “transactor” in the payment ecosystem. It:

• Captures Payment Details: When a customer is ready to pay, the gateway gathers payment information. For UPI, this could be a VPA, a QR code scan, or an intent-based deep link.

• Redirects to UPI Flow: For UPI payments, the gateway directs the user to their UPI application or initiates a deep link “Intent” flow, allowing them to complete the payment securely.

• Handles Authorization: The gateway oversees the authorization steps, where the user enters their UPI PIN, verifies with their bank, and the transaction is either approved or declined.

• Processes Response: After the transaction, the gateway gets a confirmation, sends it back to the merchant, and handles success or failure notifications.

• Settlement & Reporting: The gateway reconciles the transaction, reports status, manages chargebacks or failed payments, and provides settlement details to the merchant.

Essentially, the payment gateway simplifies and secures the UPI transaction process for businesses. It frees merchants from the complexity of working with different PSPs (Payment Service Providers), message formats, and UPI flows.

Why Businesses Use UPI Payment Gateways

Businesses, particularly digital or e-commerce firms, use UPI payment gateways because:

• They provide seamless checkout experiences where users don’t need to manually enter bank details.

• They lower risk by ensuring payments follow standardized, audited paths.

• They aid reconciliation through real-time transaction status and reporting features.

• They easily scale to support large volumes of UPI transactions without straining the business’s systems.

For instance, when a customer selects UPI at checkout, a gateway can send an “Intent” payment request or a “Collect” request, depending on the integration type, and take care of the rest.

What Is a UPI API?

A UPI API, however, refers to the set of interfaces (application programming interfaces) provided by UPI systems (or third parties) that allow applications to connect directly with UPI services.

What a UPI API Does

UPI APIs are commonly used by banks, fintechs, or businesses that want deeper integration with UPI’s core functions. These APIs handle:

• Payment Initiation: APIs to create a UPI transaction request (collect request or push payment).

• Account Linking: APIs to list accounts, link bank accounts to VPAs, and validate account details.

• Balance Inquiry: APIs to check account balance or available UPI limit.

• Transaction Status: APIs to verify whether a payment succeeded or failed.

• Mandate Management: For recurring payments, APIs may manage UPI mandates, among other functions.

In fact, NPCI provides operational guidelines for using UPI APIs. These APIs are not basic UI flows; they require system-to-system integration and follow strict message standards, security regulations, and compliance requirements.

Who Uses UPI APIs

UPI APIs are utilized by:

• Banks & PSPs: To integrate UPI functions into their banking apps or backend systems.

• Fintech Platforms: For creating payment, lending, or subscription applications that directly request UPI transactions.

• Marketplaces & Aggregators: To initiate collect requests or manage mandates.

• Large Enterprises: Companies that want to embed UPI payments deeply into their ERP or financial systems.

Unlike a payment gateway, an API is more about “plumbing” than “checkout.” It offers more flexibility but requires more technical work.

Key Differences: UPI Payment Gateway vs UPI API

To clarify the differences further, let’s compare the two across several dimensions:

Architecture and Deployment

A UPI payment gateway usually acts as a middleware layer between the merchant and UPI systems. It manages user processes, security, reconciliation, and settlement.

A UPI API is a direct integration layer where the merchant or bank’s systems connect via APIs to NPCI or a PSP that provides UPI APIs.

Complexity & Integration

Gateways offer a ready-made solution: businesses simply plug into the gateway.

APIs need custom integration, development resources, and more technical work to utilize endpoints, handle message formats, and manage errors.

Control & Customization

With a gateway, the merchant depends on the provider’s rules, dashboards, and workflows.

With an API, the business has the flexibility to create custom processes (like triggering specific collect flows or more advanced mandate models) within its system.

Compliance & Risk

Gateways provide a managed compliance layer: risk, fraud, and settlement rules are typically built-in.

APIs place the compliance responsibility mainly on the integrator (the business), since many core payment activities rely on them.

Scalability

Gateways expand capacity for merchants as they grow transaction volume, manage retry logic, reconciliation, batch reporting, and analytics.

APIs require strong infrastructure from the business to scale properly because they handle raw messages and transactional data.

Why Both Gateway and API Matter in a Modern UPI Strategy

For many businesses, relying on just one layer may not be enough. A combined approach using both a payment gateway and UPI APIs often provides the most benefits.

Businesses That Benefit from the Hybrid Approach

Marketplaces & Aggregators

These platforms may use the payment gateway for daily customer payments, while leveraging UPI APIs for advanced tasks like scheduled payouts, merchant onboarding, or collect flows.

Fintech & Lending Platforms

Companies offering loans or recurring billing might depend on APIs for mandate creation, verification, and reconciliation, while using a gateway for immediate customer payments.

Enterprise Solutions

Large companies with their own ERP systems can integrate UPI APIs straight into their financial backend while using a gateway for customer-facing payments.

High-Volume Merchants

Businesses with very high transaction volumes may want to cut down on reliance on third-party gateway fees for certain processes and use APIs for cost savings and control.

How Castler Supports Both UPI Gateway and UPI API

This is where Castler’s unified solution shines. Castler provides both a UPI payment gateway and native UPI API integration, allowing businesses and banks to choose what suits them best or to use both methods together.

Castler’s UPI Payment Gateway Offering

Castler’s platform offers a scalable, secure, and managed UPI gateway. With it, organizations can:

• Easily accept UPI payments from customers via web or mobile.

• Support standard UPI flows like Intent (deep link to UPI apps) or Collect.

• Use Castler’s dashboard to track transaction status, perform reconciliations, create reports, and monitor settlements.

• Leverage built-in fraud controls, transaction management, and compliance workflows.

Castler’s UPI API Solution

On the API side, Castler delivers deep integration capabilities:

• Businesses can call Castler’s UPI APIs to initiate payment requests from within their systems.

• These APIs support account listing, payment status checks, balance inquiries, and even mandate creation.

• Enterprises can design custom processes such as scheduled collections or recurring payments with complete control over business logic.

Why This Unified Approach Matters

By offering both options, Castler allows companies to:

• Start quickly with the gateway when time is crucial.

• Switch to API flows for more control, lower costs, or custom logic.

• Run both simultaneously: use the gateway for customer-facing transactions and APIs for backend functions.

• Keep reporting, reconciliation, and control consistent through one platform.

This strategy eases the load for technical teams, speeds up deployment, and provides business leaders with more options for shaping their payment strategies.

Real-World Use Cases

E-commerce Platform Accepting UPI Payments

An e-commerce business can integrate Castler’s UPI payment gateway to let users pay through UPI apps at checkout. The payment request follows an “Intent” flow, and the payment gateway takes care of the response, reconciliation, and settlement. Meanwhile, the company’s payments team can use Castler’s UPI API to check transaction status or initiate refunds without relying on a separate integration.

Subscription or Recurring Billing Business

A fintech company providing subscription services can use Castler’s UPI API to create recurring mandates. These mandates enable automatic collections from customers over time. Castler’s platform can send notifications, verify mandate status, and reconcile payments. For one-time payments, such as signup fees, they can still use the payment gateway.

Marketplace with Vendor Payouts

A marketplace onboarding multiple sellers can utilize Castler's gateway for buyers’ UPI payments while using Castler’s API to manage vendor payouts. The API layer can also facilitate commission calculations, fee deductions, and advanced payment flows, all within the platform’s backend.

Key Considerations When Choosing Between Gateway vs API

When planning a UPI payments strategy, organizations should consider:

• Business Volume & Scale: For low to moderate transaction volumes, a gateway may be adequate. For high-volume or recurring processes, APIs may prove more cost-effective.

• Technical Capability: If technical resources are limited, a gateway is quicker to implement. APIs require more in-depth integration skills.

• Compliance Needs: APIs offer greater control but also more compliance responsibility. Gateways may reduce risk.

• User Experience: APIs allow full embedding of payment processes into your UI. Gateways might redirect users or rely on hosted flows.

• Reporting & Reconciliation: Decide whether you want reconciliation handled by your own system (API) or via a third-party dashboard (gateway).

Conclusion

In summary, a UPI payment gateway and a UPI API may seem related, but they fulfill very different roles in the payment system. The gateway serves as the secure, high-level transaction engine for merchants and businesses, controlling checkout processes, authorization, settlement, and reconciliation. The API, in contrast, is a deeper integration layer that provides companies with control over custom payment logic, mandate creation, account verification, and more.

A modern UPI strategy typically needs both: a gateway for quick onboarding and smooth customer payments, and APIs for flexibility, control, and advanced integrations. Castler offers a unified solution that supports both elements. With its UPI payment gateway and native UPI API, organizations can create scalable, compliant, and future-proof payment systems.

If you are a business leader, fintech architect, or payments innovator looking to use UPI effectively, examine Castler’s UPI payment infrastructure solutions and discover how we can help you build, scale, and manage UPI payments with accuracy and reliability.