Here's why Unified Payments Interface can be a game changer in the era of cashless payments
India has several IT led revolutions to boast. First it was NSE backed by a robust depositories regime and then Universal Account Number (UAN) that is portable and lasts right through the employment career of an employee.
Something similar in the banking front was launched on Monday the 11th April 2016 by the National Payments Corporation of India (NPCI) -- Unified Payments Interface (UPI). Right now net banking requires a lot of preliminary steps like registration of the payee, one time password (OTP) at the time of payment etc. And mobile wallets though convenient need to be filled in either with debit/credit card or NEFT.
Banks in addition have been resenting the pure play mobile wallet companies like Paytm, with many of them shutting their cards and net banking facilities for transfers to their rivals i.e. pure play mobile wallet companies. It is another matter that despite this resentment and resistance in 2014-15, as many as 255 million non-bank mobile transactions were done as opposed to 172 million bank mobile transactions. Obviously the ease of operation worked in favor of the former. Now UPI promises to wrest back the lost business to the banking sector.
Banks will allot you a unique ID like the email ID. And in it is seeded all your confidential information in an encrypted form. When you need to make a payment, you don’t have to take the trouble and risk of typing out your debit card/credit card details, net banking ID etc. In short UPI does away with cards except for withdrawal from ATMs. The ID is followed by PIN to complete the transaction. As it is mobile wallet has quite a few restrictions with each service provider (as opposed to pure play mobile wallet) demanding payment from his own portal’s wallet if you want the discount offered by it.
Ola for example has its own wallet and so has OYO rooms. I have to take the trouble of filling all these wallets especially if I am possessed by wander lust! Now the UPI proposes to shift the advantage to the customer who can get as many IDs from his bank as he wants so that he can use one for the kirana store, one for the telecom service provider etc for safety and ease of account keeping. To these entities, your identity will be through the unique ID, and the payment will be made on presentation of the bill by just tapping out the PIN. As simple as that. Of course, the Olas and OYOs of the world might still persist with their discount only if payment is made through Ola/OYO wallet strategy
In a country of over 25 million merchants, only 1.2 million have card readers. Of course the risk-averse customer has also shied away from these establishments for the fear of his card being cloned. Secondly, use of Smartphone is on the increase though nowhere near the levels of Aadhaaar registration and ordinary cell phones---both recently crossing the one billion mark in the country. But Smartphone users are about 200 million only. All out efforts therefore must be made to increase Smartphone penetration if UPI is to succeed, eventually rendering cards redundant for online payments.
The beauty of UPI is it is amenable to be initiated by the ‘push’ from the customer as well as ‘pull’ by the supplier of services or goods. It is the ultimate in seamless funds transfer.
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