UPI addresses are linked to banks. When a merchant integrates with UPI, they are using it to transfer money and accept payments. For example if you use UPI via Razorpay - it does not ask you to create a new UPI id. What Flipkart/Phonepe did was a play to own the customer - and bring more people to their fold. So that was a strategic partnership between YBL and Phonepe via which users could implicitly get a bank account as well! However you can link your existing UPI id with it as well.

YBL does not provide software - they have certain API that you can use. You can integrate with other banks as well...Or use Razorpay. The difference between both is that it's harder to talk to banks.

The banks are still resisting it. The banks are not hugely threatened by Paytm in general but UPI is causing a drop in revenue. Check out HDFC trying to introduce UPI charges and the hullabaloo. It would have done it, if it hadn't gotten a rap from the regulators.

Payments is a two sided game - I think that Google and Facebook are figuring out how to create walled gardens around payments in India, when UPI basically makes it easy to switch apps. This is purely my conjecture at this point.

So yes, my expertise is definitely doubtful ;)