Know about National Payments Corporation of India
RBI governor Raghuram Rajan and Infosys co-founder Nandan Nilekani, adviser to the National Payments Corporation of India, have today launched the much-awaited Unified Payments Interface (UPI). While the mobile banking has been growing rapidly, mobile payments still face impediments, which the UPI seeks to address. Here’s how...
What is the Unified Payments Interface?
UPI system will allow anyone with a bank account to transfer money or make payments almost as easily as sending a text message. It is a single interface across all National Payment Corporation Systems (NPCI), allowing customer to instantaneously transfer funds across different banks with the use of single identification and password. Users ac link multiple bank accounts to a single mobile application. Money can both be requested and recieved through the same interface.
What is IMPS?
It is expected to make online payments much easier without the need of a digital wallet, credit or debit card. The service will run on the Immediate Payment Service (IMPS) platform. IMPS enables transactions using unique identification and mobile phone numbers without sharing any other bank details.
How is different from online/mobile fund transfers?
It is an additional layer of software that connects various components of the payments system. It also brings in new features like identifying a receipt based on nicknames without sharing credentials. Today, online/mobile fund transfers require the receiver to share a lot of personal information with the sender. Also, a bank’s mobile app does not transact with other bank’s apps. UPI will address these shortcomings.
How do customers access UPI services?
Banks or other parties will have to create mobile apps to provide services that are currently not possible.
Why is it expected to be revolutionary?
UPI is expected to be fourth layer of the India Stack, which is a set of application programming interfaces that enable developers to take advantage of Aadhaar for eKYC, digi lockers for storing documents, UPI for payments and digital signatures for obtaining customers’ consent. These services will help businesses go digital and scale up easily.
What are the hurdles?
A bulk of retail electronic payments is done via cards. These are supported by agreements with merchants, fraud analytics, and dispute resolution mechanisms. It’s not clear who will do these functions for UPI-based payments.
What are mobile wallet companies like FreeCharge, PayTM doing about UPI?
Online wallet companies like FreeCharge, PayTM and Mobikwik aim to integrate their services with UPI to ensure their business is not rendered superfluos by this new platform. Flipkart recently acquired UPI-based payments company PhonePe. Bipin Preet Singh, CEO, Mobikwik, told ET that in the short-term, UPI has no negative impact on wallets, if anything, it will make loading money easier.
The players believe that UPI will help in help boost the use of mobile payments which will help their business grow. Wallet companies expect this simplified interface to offer clear benefits for them to build new services.
Will this not clash with the business model of mobile wallet companies?
According to some experts, once widely accepted across the banking sector, UPI could potentially challenge the business model of mobile wallets. Vivek Belgavi of PwC India told Economic Times that a lot of mobile wallet players are trying to make the process easy, an advantage that will go away.