RBI Governor Unveils UPI For Smartphones – India’s Answer To PayPal

In a move designed to make cashless payments in India a certainty, RBI Governor Raghuram Rajan unveiled UPI – Unified Payment Interface. The app is launched to help simplify peer-to-peer transactions.

This app has been launched by the RBI in conjunction with the National Payments Corporation of India (NPCI).

With UPI, users can make transactions as low as INR 50 and leading up to INR 1 Lakh for a base transaction fee. It is currently adopted by 29 banks, 15 of which already have incorporated the app in their mobile-banking system. ICICI Bank, Axis Bank and a few others are among the notable financial institutions to integrate UPI.

ICICI Bank has already launched iMobile SmartKeys that contain the integrated UPI interface. The State Bank of India is said to be working on integrating UPI into their transaction system too.

UPI Decoded

UPI is basically a one-touch transaction for transferring money between any two parties (merchants, friends, delivery boys among others) using a ‘unique virtual address’ on a smartphone. Once a beneficiary is added to the address, an MPIN ensures transaction within seconds.

The UPI follows the IMPS (Immediate Payment Service) structure of payments. IMPS transactions, which allowed real-time 24×7 transfer of money between parties with the use of IFSC codes and MMID, were introduced in 2010 and have followed a 100% growth in transactions, YoY according to an iSpirt report. The UPI app too was launched in April 2016 and has been in the process of testing and implementation across platforms since then.

For users, it’s beneficial due to its one-click transaction facility. On the other hand, merchants get a base Transaction Discount Rate for using it while accepting and conducting transactions. The app has a faster process in place to facilitate instances where multiple intermediaries are involved.

“What it does is turn phones into bank branches,” said Rajeev Suri, Head of Marketing at Innofest, of the ease of doing business with the UPI. “Like Aadhar, UPI is basically the API-isation of payments and other transactions. Where once it is integrated, it can be used to build on and over existing applications for both marketplace sellers as well as banks,” he added.

How This Move Affects Startups

NPCI-backed UPI is a feature intended to be the next wave of conducting any transaction digitally by 1.2 billion Indians. Its adoption by major banks is an indicator of this intention. So it is imperative for ecommerce and mcommerce startups to get onboard the new payment interface and integrate it on their apps, turning it user-friendly. This only requires a single unique ID for the portal.

But even before this, FinTech startups have a major responsibility to educate recalcitrant users about the veracity and security of the virtual private address. The idea of owning a virtual private address with a particular bank while not having an account of any kind with the same. With Jan Dhan Yojana and other schemes instituted by the Government, a significant portion (estimated 22 Mn) of India’s unbanked now possess a financial digital footprint.

The UPI aims to leverage on this.

While the app makes it convenient for us to buy groceries, milk or newspapers from a vendor that has a unique virtual address, ecommerce and mcommerce portals are going to be affected immediately by its introduction. For one, it does away with the need to involve third-party payments platform such as Paytm, Freecharge, Chillr, and others that facilitate easy and cashless payments while transacting online.

For another, India’s dependence on Cash On Delivery (COD) will decrease and disappear slowly.

India is at the forefront of the mobile-first economy with a lot of startups in the FinTech vertical successfully penetrating to make robust progress. Just this week, PayPal too launched PayPal.Me for enabling easy cross-borders transactions for SMBs and freelancers working with overseas clients. The UPI app is just the next step that makes it possible for users to loan or receive money from even their friends at the touch of a single button.

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