1. United Payments Interface: Post-dream launch, just Rs 3.5 crore daily volumes

United Payments Interface: Post-dream launch, just Rs 3.5 crore daily volumes

After a dream launch with then RBI Governor Raghuram Rajan and Aadhaar founder Nandan Nilekani as far back as April, NPCI’s United Payments Interface was seen as the face of the new payments revolution in the country.

By: | Published: November 26, 2016 6:11 AM

After a dream launch with then RBI Governor Raghuram Rajan and Aadhaar founder Nandan Nilekani as far back as April, NPCI’s United Payments Interface (UPI) was seen as the face of the new payments revolution in the country. It had full security and, most important, allowed you to mask your identity while also masking the details of your bank account—so, for instance, a person with an ICICI Bank account could use an HDFC UPI app and have an address [email protected] while linking the account to the ICICI account. Yet, as NPCI managing director AP Hota said on Tuesday, there are just about 10,000 daily transactions on UPI with an average value of around Rs 3,600. To be sure, the first few months were used in the banks testing the app and it was only this week that SBI got on to the platform—HDFC Bank joined a few weeks ago—but there is little doubt the pace of adoption is very slow, especially given that PayTM is at 5 million daily transactions and is talking of being on track to get Rs 24,000 crore of transactions this financial year.

While few doubt the simplicity-plus-security of the UPI interface, getting people to make payments through it and vendors to accept them requires tremendous marketing effort, and funds. Not only is a lot of advertising required, generous cash-backs are required and other incentives are required to convince vendors. NPCI, which has done a great technical job in the payments space from IMPS to RuPay, however, does not have such deep pockets as the non-bank wallets seem to have. So, apart from the few advertisements it has put so far, or the three minutes of television time economic affairs secretary Shaktikanta Das gave UPI in his morning briefing on Tuesday, there is little UPI can do to actively canvass users. It is then up to the banks to push UPI but there is no certainty banks will push it given most have wallets which are competing products.

From the country’s point of view, of course, it doesn’t matter whether it is UPI that is used or bank or non-bank wallets—the important thing is to ensure that, once the cash crunch is over, Indians don’t go back to using cash for most transactions. Apart from the fact that more taxes get paid when a transaction is not made in cash, as a recent Visa study points out, the common man loses over R150,000 crore (1% of GDP) due to the cash economy—had the money been kept in banks, it would earn interest—and SMEs lose another R90,000 crore since the bulk of top management time is spent on only looking after cash. While a large part of the cash economy will get checked once GST takes off and stabilises, the government also needs to do its bit. Visa talks of how, based on income and expenditure patterns, tax exemptions of around R60,000 crore over the next five years will go a long way in encouraging people to spend more by way of e-payments. Paying for PoS machines and creating funds/structures to promote e-payments and reasonable tax rates are critical if India is not to lose the momentum against cash created by the demonetisation.

  1. G
    GP
    Nov 26, 2016 at 3:35 am
    The main issue with all these online payment systems is that they all ultimately boil down to depending on Cell Phone OTP or mobile data connection one way or the other. So if a mobile PIN setup by customer is combined with OTP received by SMS, to a large extent, payment process can be simplified and made usable via ordinary candy bar phones as well as smartphones. As things stand today, UPI umes a smartphone is in use. Further these interfaces are not flexible enough to be consistent for different receiver parties preferring different types of receipts. NRIs are often not able to use these services are they are not enabled for non-resident a/c holders. In the end UPI becomes yet another way to pay but not good enough for merchants to rely on them all the time.The only way online payment can become universal is if it becomes a demand based system. Merchant website or physical shop owner sends demand for payment to a central system by SMS addressed to your mobile number or some unique (international) number and customer is able to "satisfy" that payment via some common gateway. Whether they use bank a/c or credit or debit card or even cash payment somewhere is immaterial to the merchant.Another way is to have ATM machines that dispense short term value coupons for use in big shops and malls. Customer uses his phone to make ATM dispense a fixed value coupon which the receiving merchant must deposit in same machine or different machine within few days or a week to complete the cycle and get his money.The main aim of all online payment is to enable tracking for taxation purposes. So as long as some system is involved as one of the key steps before transfer of funds occur, it will work very well.
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