A Tech-tonic Shift In Payment Space

The government’s initiative for Digital India is certainly yielding results. The total transactions of Unified Payments Interface (UPI) springing to 1.15 billion in October 2019 from 0.96 billion in September 2019 clearly shows the changing transaction pattern in India.

The total transaction value of UPI stood at Rs1.91 lakh crore in October 2019 compared to Rs1.61 lakh crore in September 2019. Elaborating the reasons behind the quick adoption, Praveena Rai, Chief Operating Officer, National Payments Corporation of India (NPCI), says, “It is difficult to attribute UPI transaction growth to one single factor. The transaction growth is due to a combination of factors including simple and easy-to-use product, interoperability leaving the choice of app and bank  in the hands of the user, increasing acceptance of  UPI with merchants, and great collaboration between banks and non-bank players with all the players bringing in their respective best-in-class expertise  to the user.”

The UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments into one hood. It also caters to the “peer-to-peer” collect request, which can be scheduled and paid as per requirement and convenience.

The NPCI — the umbrella organisation for operating retail payments and settlement systems in India — conducted a pilot launch with 21 member banks in April 2016 by Raghuram G Rajan, then Governor, RBI at Mumbai. Banks have started to upload their UPI-enabled apps on Google Play store from August,  2016 onwards.

The 10 core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank N. A. and HSBC. In 2016, the shareholding was broad-based to 56 member banks to include more banks representing all sectors.

At present, 141 banks are live on UPI, compared to 21 banks when the payments system was launched three years ago. The total number of third-party payment apps is 40. Mahesh Makhija, Partner and Leader, Digital and Emerging Tech, EY attributed the popularity of UPI to apps features like easy to set up and link to a bank account as no additional KYC is needed.

“They are easy to use through streamlined and simple payment experiences for customers and almost instant payments. And they are perceived as secure as the sender can see the recipient details in real time and also see the payment confirmation in real time. These features along with gamification of the payment experience by UPI PSPs is what is currently driving usage,” he says.

UPI is preferred because it allows mobile-based payments with the option of transferring money 24x7 without giving out the beneficiary’s bank account details. Expansion of both the user base as well acceptance infrastructure is the key to enhance the popularity of UPI. “Ecosystem is taking steps to increase the user base through functionality enhancements and other promotional methods. On the acceptance front, the key is to expand the base of offline merchants who accept payments using UPI. There are sustained efforts that are made by the entire system for the same,” says Rai. There are other functions within NPCI like Bharat Interface for Money (BHIM) app and RuPay cards, which also facilitate digital transactions. BHIM app through its launch helped proliferation of UPI and acted as the leading UPI-enabled app. BHIM through its enhancements provides the latest offering from UPI. Like applying IPO using BHIM, linguistic diversity – currently BHIM is available in 16 languages, bill payments on BHIM, BHIM for a cause and BHIM gifts using the mandate functionality of UPI.

The Indian payment industry is undergoing a digital shift driven by regulatory policies, mobile phone proliferation, digital innovations and millennials. It is expected that in the next few years it will witness more traction in the digital payment space.

aparajita@outlookindia.com