Digitisation drive: UPI is gaining currency among users but concerns of tech glitches, frauds remain

The National Payments Corporation of India’s payment solution Unified Payments Interface (UPI) has been growing leaps and bounds since its launch in August 2016.

Within a span of 11 months from its launch when it started off with 93,000 transactions valued at Rs 3 crore with 21 banks going live, it shot off to 1 crore transactions in June 2017 valued at Rs 3,067 crore with 52 banks going live.

The government-backed UPI has been lauded for its many features like trustworthiness, ease of doing business among others but there are a few concerns.

Analysts pointed out the few glitches that could mar the smooth functioning of the payment system.

Atul Gupta, Head – Cyber Security, KPMG in India, says there can be malpractices which can arise largely because of the consumer being unaware of the secure method of using the app. No matter how secure the payment system is, if the customer doesn't pay heed to security systems on the mobile phone for instance, he/she can risk losing the money.

The UPI app is available on the Google Play Store of Android phones. But Android phones are not foolproof, says Gupta. A user tends to download apps on the phone which cannot be trusted. The information used while operating the UPI on an android phone may be captured by other apps. "So, even if the user has not shared the details with anyone, one or the other app which is not secure can capture it," he points out.

Another worry is that technical glitches could creep in as more users log on to UPI.

The need of the hour is for people to be educated about the ease of doing business with regard to UPI. Gupta, citing an example, points out when phishing attacks were on the rise in the initial days of net banking. This was because users were using it without much awareness about the security aspects and phishing attacks saw users losing their money.

"The regulator had then asked banks to come out with information in the public space that enabled users with carrying out transactions online," says Gupta. Thus advertisements on television, radio, print and also text messages helped create an awareness about net banking and made users careful about using the service so that phishing attacks could be avoided. Similarly, the government needs to come out with information on all channels of communication so that users know how to safely use UPI, says Gupta. Advisories are also needed that can help caution the user, he adds.

One of the highlights of UPI is that a user needs to get a virtual address and there is no need to reveal phone numbers or transfer money to a wallet, etc. Pradeep Oommen, Managing Director, Bijlipay says that people have to be educated about getting virtual address to be able to use UPI. The government  and the financial intermediaries should educate people about how to use UPI, he says.

If you want to get the entire payment ecosystem on UPI, it also needs to incorporate merchant payments. To promote that, fintech and intermediaries should be involved and and there should be a commercial or an incentive structure for all stakeholders holders, says Oommen.

For merchants, as of now, there is no Merchant Discount Rate (MDR), points out Sanjay Khan Nagra, senior associate at Khaitan & Co. Lack of MDR has made mobile payments unattractive for merchants. “Going forward, if the government decides to levy MDR – a percentage of transaction, merchants would prefer it as with goods and services tax (GST) becoming a reality now, it makes it easy to record non-cash payments,” he says.

UPI, a success story

Terming the UPI a ‘brilliant’ move by the government, Nagra says that the biggest advantage of the payment solution is that it does not require the individual to park funds in a wallet. This is a huge advantage in rural areas where people are not savvy with online financial services.

Earlier, people in the rural areas preferred IMPS – Immediate Payment Service, an instant interbank electronic fund transfer service through mobile phones – but migrated to UPI for ease of doing business.

IMPS gained a lot of popularity as one could do transactions beyond banking hours and across any banks. UPI operates on the same platform and is a substitution to IMPS as the latter did not have easy debit capability.

Oomen of Bijlipay feels that ease of doing business is the biggest USP of UPI. Earlier, in the e-commerce space, a customer had to rely on card or net banking. That was cumbersome. UPI is a one-step payment. All you have to provide is your virtual address. With BHIM app, P2P has taken off. You don’t have to give IFSC code or other details.

AP Hota, MD and CEO, NPCI says the reasons for UPI’s success is the “increased acceptance among member banks, merchants and consumers. Usage of UPI powered BHIM App (Bharat Interface for Money) has also been a significant contributor.”

A P Hota, CEO of National Payments Corp of India (NPCI). Reuters

A P Hota, CEO of National Payments Corp of India (NPCI). Reuters

Another reason, Hota said was that there is a  'significant push' from the government to adopt UPI as one of the preferred payment options by end-users.

"This has been the case, both during the demonetisation and post-demonetisation era. The overall target for UPI for 2017-18 is to achieve over 400 million transactions and with the growth expected to come in the next few months with growing adoption, we are sure of covering the shortfall in the ensuing quarters. Publicity and awareness campaign on BHIM would start shortly," Hota said.

Use case development other than person-to-person remittance is the key. Once Bharat QR is made a part of BHIM version 1.4, which will be released by 31 July, 2017, usage of BHIM app for bill payments will grow substantially.

What it does

UPI facilitates virtual payment address as a payment identifier for sending and collecting money and works on single click 2-factor authentication. According to the government, the product will enable money transfers – both ‘push’ and ‘pull’ through smart phones. According to it, the two important features of UPI are, i) it facilitates customer convenience by eliminating the need for providing detailed account/beneficiary details, through the use of virtual address; and ii) it facilitates interoperability of person-to-merchant payments (both push and pull).

For using UPI, the user has to have a virtual identification and that works across banks. In mobile wallets, the user has to give his/her mobile number.

The government launched BHIM as a smart mobile phone-based app on Unified Payments Interface (UPI) platform that allows simple, easy and quick payment transactions. Since it is a government app, people tend to trust it and see it as ‘safe’, says Nagra.

BHIM enables a user to easily make direct bank to bank payments instantly and collect money using mobile number or payment address. It enables an individual with immediate send and collect request.

When the UPI crossed 10 million transactions in June, Hota had said, “Our current focus is on the release of next version of BHIM App with enhanced functionalities.” Perhaps that will allay the fears.

(With data support from Kishor Kadam)


Published Date: Jul 20, 2017 05:12 pm | Updated Date: Jul 20, 2017 06:10 pm


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