Payments landscape is rapidly changing globally and India is no exception. The thrust is on migration from cash and paper based payment mechanism to electronic payment systems. In this direction, National Payments Corporation of India (NPCI) has rolled out the Unified Payments Interface (UPI) whereby sending and collecting money on a real time basis will be as simple as sending SMS or an e-mail.
It is one-of-a-kind platform available to the banked smartphone users in the country. The objective is to leverage the trends like increasing smartphone adoption and mobile data connectivity in India. Currently, there are about 250 million smartphone users in the country which is expected to grow 500 million users within couple of years.
At present, 29 banks are gearing up to adopt UPI and going forward, more banks will soon join the race for the technology. UPI empowers a user with a virtual payment address like xyz@bankname.com to perform banking transactions, it is easy and secure to share as the bank details are not revealed for performing transactions. It complies with the Reserve Bank of India’s two factor authentication policy on payments. UPI requires strong customer authentication procedure by mandating at least two out of three factors: what customer knows (M PIN), what customer has (Mobile handset & mobile number) and what customer is (biometric fingerprint).
There are about 1,222 million bank account holders in the country, out of which only 650 million account holders own debit cards. Similar gap is seen at merchants’ end wherein close 1.2 million point-of-sales (PoS) terminals cater to 15 million registered merchants. Moreover, numbers of ATMs are also not sufficient as compared to the vast market size. UPI will address these challenges by levering on mobile phone based payment interface for two basic services – immediate send and immediate collect.
UPI promises to be a boon for ecommerce companies as it will save the hassle of managing and reconciling cash derived from the sales of products. They can now initiate collect request over the phone instead of receiving cash-on-deliveries, similarly educational institutions can collect fees, billers can collect bills from consumers by automating the collection process on the due date, one can request pocket money from their parents or peers can just split bills seamlessly amongst themselves.
Currently, only 15-18% out of 1.25 billion citizens performs electronic transactions and we believe this figure would improve with UPI getting fully operational with major banks. It is going to be a transformational project considering the power of real time money transfer being leveraged both by individual customers and merchant community.
About A.P. Hota
Mr. A.P. Hota is Managing Director & CEO of National Payments Corporation of India since February 2009. A significant part of his career in Reserve Bank of India from 1982 to 2009 has been in the area of design and implementation of payment systems in India. Under his leadership, NPCI has launched India’s own card scheme ‘RuPay’ in record three years’ time which is accepted on all three channels, viz. ATM, PoS and ecommerce sites. A RuPay Debit card has an issuance figure of 260 Million plus cards. He has also been instrumental for building the Direct Benefit Transfer platform in the country using which bulk of the benefits are transferred in cash. He is Honorary Fellow of Indian Institute of Banking and Finance. He is a member in various Committees of the Government of India and Reserve Bank of India (RBI) and has contributed to policy and decision-making processes in Payment Systems and Financial Inclusion in particular. He is a regular speaker at Payment systems and Financial Inclusion conferences in India and abroad.
About NPCI
National Payments Corporation of India (NPCI) was set up in 2009 as the central infrastructure for various retail payment systems in India. It was envisaged by the Reserve Bank of India as the payment utility for all banks in the country. During the last five years, the organisation has grown multi-fold from 2 million transactions a day to about 22 million transactions now. From a single service of switching of inter-bank ATM transactions, the range of services has grown to Cheque Clearing, Immediate Payments Service money transfer (24x7), Automated Clearing House, Electronic Benefit Transfer and a domestic card payment network named ‘RuPay’ to provide an alternative to international card schemes.
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