UPI Boost Digital Payments In IndiaeTailing India Thought Corner

In order to promote cashless transactions and move towards hassle free payments or digital

money and ultimately increase financial inclusion, UPI is created. It is a cheap, secure, reliable,

mobile-first, interoperable, open-source, instantaneous technology with both pull and push

platform.

What is UPI?

Unified Payments Interface (UPI) is an open-source platform designed for the mobile age that

helps with easy integration of various payment platforms. UPI is powered by a single payment

API and a set of supporting APIs.

Core features:

It acts as primary device for all payments including person-to-person, person-to-entity and vice

versa. The technology features the use of mobile to “pay” someone (push) as well as “collect”

from someone (pull). The payment is facilitated only by providing an address. This doesn’t

require other credentials on third-party applications or websites.

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Aadhar number, mobile number, card number and account number is used in a unified way.

UPI is fully interoperable across all payment system players without having silos and closed

systems. All payment system players can use a set of APIs for any-to-any push and pull

payments.

Nandan Nilekani, man behind Aadhar and now an advisor to NPCI, said: “UPI is a layer we have

put on IMPS.

How it works?

Banks will have to first implement UPI system

Customers will have to ask their banks to connect them to the UPI system.

For making any transaction, two options are available i.e. you can either global or local

address.

Global address means mobile number, Aadhar number and bank account number.

Local address means a virtual address, which banks will provide you.

So if you want to make payment through smartphone, let’s say to a grocery store owner

then just provide your virtual address to the owner. Normally you provide either the

bank account number or swipe your credit/debit card and enter security PIN.

Owner will then enter this address in his mobile phone.

You will then receive a reply on your cell phone requesting authentication.

You need to then authenticate this transaction by entering a password. So if you receive

any unauthorized request, it can be easily rejected.

If all the steps go correctly, transaction will be successful.

Money will be directly debited from your bank account and get credit into the bank

account of the service provider. In this case, grocery store owner.

Thus neither the store owner nor you would be required to share each other’s bank

account details. And there is no need of swiping debit/credit card, keying in your

confidential PIN.

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Benefits of Unified Payments Interface:

Direct benefit transfer, a government scheme will gain more boost.

Since cash transactions will be reduced it will reduce the cost of producing paper money

or currency coins.

Transaction charge would be less compared to what we currently to international

players offering mastercard or visa card.

Visa Group Country Manager TR Ramachandran quoted that India can reduce its cost of cash to

1.3 percent of GDP by 2025 from the current 1.7 percent and save around Rs 4.7 lakh crore by

shifting to more digital means of payment.

Future of mobile wallets

PayU’s chief executive officer Laurent Le Moal quoted to BloombergQuint that the introduction

of the UPI by the NCPI will make mobile wallets to evolve. Payment wallets are integrating the

technology in their platforms. Flipkart-owned mobile payments PhonePe recently crossed over

100,000 as it looks to ride on the unified payment interface (UPI) platform to build a large

digital payments business. Similarly, Bipin Preet Singh, Founder and CEO MobiKwik said, “With

the Unified Payments Interface in place, our expectation is that we would unlock a new channel

for growth since the universe and reach would enlarge.”

What it holds for eCommerce players?

The cart abandonment rates for Indian e-tailers are around 51 per cent. Some research

suggests that it could be as high as 70–75 percent, costing eCommerce companies $10 billion

yearly. Broken online payments experience is identified as one of the reasons for high rate of

cart abandonment. Also, COD has been long considered as a bane to the eCommerce

ecosystem. UPI can get away with all this obstacles for the etailers.

Government efforts

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The Digital India initiative is at tandem with the UPI. Ruth Goodwin-Groen, Managing Director

of the UN-promoted “Better Than Cash Alliance” said “One of the real game changers in UPI is

that it is interoperable.”She stressed the fact merchants acceptance of UPI is the first of the

“accelerators”. Also, government is creative ways of building up the infrastructure that will

ensure that there is no weak link in building the UPI ecosystem.

Conclusion

UPI carries potential to make micro payments cashless that will benefit both buyers and sellers.

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