The Unified Payment Interface (UPI), which is now widely available with most leading banks in India, is going to make a huge difference to the real time payments as well as help in increasing digital payments, taking India closer towards becoming a cashless economy.
We’ve had multiple digital transaction systems in place for years now. IMPS, NEFT, debit cards etc. had made life easier for banking consumers. But the UPI is going to take things to the next level. Here’s how.
It will reach the masses
Presently, digital payment systems tend to be favoured by those living in urban areas or those affluent enough to afford internet connections. To be able to use net-banking requires a high degree of computer and internet literacy. The UPI promises to be far more democratic, and will appeal to large swathes of people who can carry out banking activities from their cell phones. The simplicity of mobile transactions through UPI will create progress in terms of financial inclusion, allowing an increasing number of people to open bank accounts and transact through their phones.
Impact on e-wallets
E-wallets have limited cash-transferring abilities compared to the UPI. As per RBI guidelines, an e-wallet can allow payments for merchant transactions with a limit of Rs 10,000 for non-KYC compliant users and up to Rs 1 lakh to KYC compliant users. UPI allows transaction of Rs. 50 to Rs 1 lakh per day for all users. E-wallets allows direct transfer of payment to an individual or a company depending on whether it is open, closed or a semi-closed wallet system. The biggest advantage of the UPI is its inter-operability among various banking platforms. Current e-wallets do not allow you to transfer money to another e-wallet, whereas the UPI lets you easily transfer it to any networked bank. However, e-wallets can continue to come up with attractive marketing schemes such as cash backs, discounts and offers, which the UPI does not offer. E-wallets have merchant tie-ups due to which these offers are possible.
The preferred payment gateway
The UPI will definitely impact existing online payment systems such as IMPS and NEFT. The UPI is faster and easier than the current payment systems which may require information such as IFSC, MICR, payee names etc. while initiating fund transfers. The UPI needs just the payee’s registered mobile ID and therefore offers more convenience at no cost to the security of the funds due to its two-factor authentication. Fund transfer costs are also low at 50 paise per transaction. These factors combined would make the UPI the most popular digital payment system available.
There is no doubt that UPI will transform the payment system in the country and very soon you will not need to carry your wallet while going out. You may not even need your debit card or need to visit an ATM. All you need is the power of your cell phone.
The author is CEO, BankBazaar.com