By Vivek Iyer

Unified Payments Interface (UPI) users can now authenticate transactions with fingerprints or facial scans on their devices, eliminating the need to manually enter the personal identification number (PIN). This offers the much-needed efficiency that can work as a growth multiplier for the economy through increased velocity of transactions, explains Vivek Iyer

How has UPI worked till now?

Every time a payment is to be made via a third party-based UPI app, a Personal Identification Number (PIN) is entered to authenticate or approve the payment. Till now, this has been the only way. Any payment that is done over a digital application needs authentication to verify the credentials of the individual making the payment.

What’s the issue with PIN-based authentication?

There has been a rise in UPI related frauds on account of phishing and malicious links which when clicked can result in your sensitive data such as the PIN being hacked. Fake QR codes, SIM cloning are some other types of frauds that have made the PIN as an authentication mode vulnerable. Because of this, there was a need felt to move to a different mode of authentication for UPI based digital payments.

What is biometric authentication?

Biometrics based authentication is using your fingerprint or face as a valid credential for making payments. Bio refers to the human body and metric refers to a measure — which when read together refers to using a part of your body as an authentication mechanism for making payment. 

Is the new authentication mechanism better for customers?

The answer to this question lies in the aspect of customer convenience and customer security. A face-based authentication or a fingerprint-based authentication is extremely convenient for a customer, given that there is no need to remember the PIN for the purpose of making a payment. 

Biometric based authentication also offers a high level of customer security, given the unique nature of biometric credentials as these cant be cloned. Further, offering biometric based credentials makes it extremely user-friendly for senior citizens and customers with limited levels of literacy, enabling the broader democratisation of the payment’s ecosystem across the hinterland of the country. 

Is this only for payments?

Aadhaar based face authentication can be used for the purpose of setting or resetting the UPI PIN, eliminating the need for debit card details or Aadhaar OTP. This will make it extremely easy for first-time users such as senior citizens. 

Impact on the economy

Growth in any economy is dependent on the effective interplay between the real economy and the financial services ecosystem. Real economy determines the quantum of growth, and the financial services economy determines the multiplier effect of the growth. Innovation in payments offers the much-needed efficiency that serves as a growth multiplier. It is in this context, that the recent announcements on UPI authentication should be understood.

Will this innovation lead to value and volume growth in UPI transactions?

Growth in UPI can come in from increasing the value and volume of transactions. Value is a function of the levels of platform security and that usually follows once volumes increase and the level of frauds are within a tolerable band. We are at a stage where we need to increase the transaction volumes by democratising the same across all the customer categories, young and old alike. Offering customer convenience through enhanced security measures guarantees the same and hence the answer in the form of biometric enabled authentication. 

Friction-less payments enable the growth of the economy through increased velocity of transactions. Biometric enabled authentication is a step in that direction, and we should be able to see the impact of the growth in the coming months. So just smile and pay away.  

The writer is partner and national leader – Financial Services Risk Advisory, Grant Thornton Bharat