Technology, as they say, is a great leveller, in that it provides equal opportunity to big established players and small startups. A fine example of such a technology is Unified Payments Interface (UPI), launched by National Payments Corporation of India (NPCI) in 2016 to simplify and provide a single-window secure interface across all NPCI systems. By providing a level playing field and opportunity for banks big and small and by reducing costs, the UPI platform has been successful in consolidating niche payment systems into a common inter-operable ecosystem. This has truly become a game changer for the Indian digital payments industry.
UPI has also offered bank customers an unfettered access to their accounts. Earlier, customers could make payments from their accounts in their own bank’s mobile app only, whereas any UPI app can be used by any customer, leading to customer independence and mobility. UPI’s interoperability has made money transfer easier, speedier, seamless and secure for Indian mobile users.
Due to this inter-operable framework and superior customer experience, UPI-based transactions have witnessed an explosive growth. In January 2018, a total of 151 million UPI transactions were conducted in India with a total value of Rs. 15,571 crore. By June 2018, the national volume increased to 246 million transactions, while the total value more than doubled to Rs. 40,834 crore. The monthly volume and value more than doubled again to 525 million transactions amounting to Rs. 82,232 crore in November 2018.
This growth is bound to increase with the availability of an advanced version of UPI solution, namely UPI 2.0, recently launched by NPCI. The key features of UPI 2.0 include Overdraft Facility, Invoice-in-the-Inbox, One-Time Mandate and helping customers check a merchant’s authenticity by scanning QR code. With UPI 2.0, customers can now view an invoice sent by a merchant and verify the sender’s credentials before paying, ensuring the payment reaches the right entity. Customers can make payments to authentic entities by scanning verified QR codes, making app pass codes redundant and discouraging QR tampering and non-verified entities.
So far UPI was focused mainly on managing a customer’s debit card accounts. 2.0 takes the functionality further and has made it easy for the customers and merchants to make secure transactions. One-Time Mandate is another new feature that enables both merchants and customers to create or pre-authorize a transaction and pay at a later date. The feature of amount blocking (ensuring enough account balance before availing a service) will help hotel aggregators and cab owners whose customers book a service in advance and pay later. It also helps customers to securely purchase a product online and pay for it upon delivery.
In the near future, we expect to see further integration of payment systems on the UPI platform. For example, in addition to Savings and Current accounts, a customer can add Overdraft accounts to the UPI 2.0 app, which could lead to inclusion of credit card accounts as well. This provides a great opportunity for technology players involved in creating digital payments apps, offering payment gateway services, and deploying POS terminals. This bodes well for the customers and merchants in particular and the Indian economy in general.
(The author is the Founder and Vice Chairman of Sarvatra Technologies – a leading end-to-end payments and banking technology solutions provider in India. It holds leadership position in providing technology for UPI transactions in India. It manages a major portion of the total transaction volume that is generated on UPI and IMPS nationally.)