Demonetisation: To get India to trade and transact digitally, UPI needs to succeed

Depending on if you used NEFT or IMPS services, the transfer happens in real-time, or could take a couple of hours. This depends on the urgency, of course.


If we were to meet today, and I borrowed a few hundred rupees, how easy would it be on you? These are difficult days. But it’s a temporary crunch. It shall pass away. For many SEC1 urban junta, money isn’t the problem. Cash is. They're still able to hop from one corner of the city to another, thanks to wallets and taxi aggregation services. They're able to dine, splurge, shop or buy medicines using their debit or credit cards.

Life really hasn’t come to a standstill for most. Unfortunately, it’s the ones who do grocery shopping who have to bear the brunt of cash. Statistically, the urban Indian male probably thinks life is going on as normal. It’s the urban and sub-urban Indian woman who has to take on the challenge of either convincing the fruit or vegetable vendor to permit credit for a month, or to accept Rs 2000 notes. Come what may, bills need to be paid.

Now this isn’t a phase of a collapsing economy, war or poverty. The engines are chugging, the economy is growing, probably stepped on full gas right now. Yet, transactions are limited for want of liquidity. Simply put – cash.

Coming back to transacting a few hundred rupees. What’s the easiest most convenient way of carrying out such dealings?

Use a wallet

Yes. That helps. Only, both parties need to sign up, have the relevant app on their smartphones, with their respective bank accounts tied in. So the wallet gets loaded from the bank account. Then, there is a wallet-to-wallet transfer. If the recipient needs all that money, s/he simply transfers it to their respective bank accounts. Mission accomplished. And they sleep peacefully.

 Demonetisation: To get India to trade and transact digitally, UPI needs to succeed

Unfortunately, most services have a preferred wallet system. For instance, if you use Uber, you'd pay via Paytm. On the other hand, if you want to use Ola, Ola Money is the only choice you have. In effect, wallets end up being restrictive. It's not as open ended as a bank transfer.

Do an online transfer

This is the Plain Jane way. The sender requests for the recipient’s bank account details – including account name, number, branch, and IFSC code. These details are added as a beneficiary in their existing Internet banking system. Once approved, transaction is done. Mission accomplished. Faster. And it’s direct. Is available 24 hours a day.

Image Credit: REUTERS

Representational Image Credit: REUTERS

Depending on if you used NEFT or IMPS services, the transfer happens in real-time, or could take a couple of hours. This depends on the urgency, of course.

Why another mode of transaction?

India has an impressive rate of mobile and smartphone penetration. Despite all the hype around how we're among the fastest growing mobile markets in the world, mobile transactions are abysmally low. For good reasons. And this would need a 360-degree approach to sort out. Picture this.

You're making an important payment. Such as tickets. You browse online and it presents a login page for your payment gateway. You sign in to your bank's website, do your transaction. All this while, you'd be depending on connectivity to go through the critical steps of authentication. We definitely need something better. Something that simplifies the security and authentication process at the same time. If there's one standard process that brings banks under one umbrella and enables businesses to implement payments and fund transfers in an easy and convenient way, it would increase adaption rates of mobile transaction.

What’s better?

The all-new Unified Payment Interface, which was launched on 11 April this year. The objective was to bring a unified platform that enables P2P money transfer, B2C, M2M transfer all under one umbrella. Since this is done with the initiative of the RBI and the Indian Banks Association, it comes across as any standard feature such as NEFT or IMPS. Besides, unlike wallet services such as Paytm, it ends up as a default service on existing banking apps.

What's interesting with UPI is that you could simply share your identifier which resembles an email address. For instance if your name is Manoj, and you hold an account with HDFC Bank, you could select a unique identifier such as manoj@hdfcbank. That's all you would ever need to share with anyone who needs to send you money. No hassles around IFSC, Bank account number or any other numbers. Since the sender has selected his/her user ID, it's authenticated to the account. It's easy to remember and convenient.

A. P. Hota, CEO of National Payments Corp of India (NPCI) speaks during an interview with Reuters at his office in Mumbai September 3, 2014. A government drive to expand banking services in India is giving a boost to home-grown card payment network RuPay, which expects to quadruple the number of users by March and make debit cards more acceptable in a nation where cash is still king. Picture taken September 3, 2014. To match INDIA-PAYMENT/CARDS REUTERS/Shailesh Andrade (INDIA - Tags: BUSINESS POLITICS) - RTR45T69

A. P. Hota, CEO of National Payments Corp of India (NPCI) speaks during an interview with Reuters at his office in Mumbai September 3, 2014. A government drive to expand banking services in India is giving a boost to home-grown card payment network RuPay, which expects to quadruple the number of users by March and make debit cards more acceptable in a nation where cash is still king. Picture taken September 3, 2014. To match INDIA-PAYMENT/CARDS REUTERS/Shailesh Andrade

According to the NPCI website, 17 banks are currently live on the system. These include Axis Bank, ICICI Bank and several others joining in.

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NCPI also issued a statement yesterday, where it was waving off setup charges for new merchants. In the current scenario, when cash transactions are difficult due to shortage of currency notes, there can't be a better opportunity to get India to adapt digital transactions as the default choice.

In an ideal world, you could step in to your local bakery (let's call it Tasty Bakery), make your purchases, and when it comes to paying, you could simply open your app and enter tastybakery@icicibank and you're done. All of this form your bank's default app. This simplifies the whole process for numerous customers who have concerns over messing up the transaction online. Especially late adopters of mobile payment.


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