The spread of internet banking and, after that mobile wallets, has done wonders for India’s digital payments economy – according to the latest FIBAC report, though the value was far smaller, there were more transactions on non-bank digital wallets (255mn transactions) in FY15 than there were mobile banking transactions (172mn), and the number is set to grow exponentially. The problem is, much of this is not inter-operable, so what is being created was a series of silos – banks put restrictions on their customers loading cash on to other wallets, many taxi aggregators accept digital payments only through their wallets and transferring money from one wallet to another is next to impossible though the presence of platforms like Chillr does help to some extent. The fact that India has just 1.2 million point-of-sale (PoS) devices that can read debit/credit cards – in around 25 million or more merchant outlets – also puts a limit to the spread of cards. Also, using debit/credit cards exposes user to the risk of their cards being cloned and internet banking is time-consuming given how details of the user’s bank account and IFSC code need to be fed in – creating a beneficiary account for internet banking also takes a few hours, taking away the necessary flexibility so important in a digital age. Hardly surprising then, that the bulk of transactions in India tend to take place in cash.
Just as it changed the card business with its RuPay, the state-owned National Payments Corporation of India (NPCI) has come up with a revolutionary payments concept that is both interoperable and is fully mobile – with this, NPCI joins an illustrious list of state-promoted initiatives like NSE, NSDL and UIDAI that both revolutionized their businesses and showcased India’s tech talent and ability to come up with easy solutions to truly large problems. Unlike the existing systems that are time-consuming and require users to input lots of details (like the IFSC code of the beneficiary or your credit card number, expiry date and CVV), NPCI’s United Payments Interface allots each user a unique number – financialexpress@sbi, for instance – which is linked to his/her bank account. A user may or may not wish to link an Aadhaar number to a UPI address and can even create different UPI addresses for different people – one for the kirana shop and another for buying on Amazon. If a payment has to be made, it can be made to this ID without any personal information being shared, making the system a lot safer than others. With most banks expected to be on UPI quite soon, digital transactions get a huge leg up since the system is bank agnostic. Also, since any individual with a bank account and a phone – right now, UPI cannot be used by wallets – can receive money, the restriction put by having just 1.2mn PoS devices goes away. UPI also allows a seller, for instance, to raise a bill on someone and if the person okays the transaction – by inputting a PIN number – the payment gets made. This is just the beginning since, as happened with Aadhaar, you can expect to see a host of apps getting built using UPI. Truly, a great day in India’s payments history.