Since the launch of Unified Payment Interface ( UPI) by NPCI ( National Payment Corp of India) over last week, there has been a lot of buzz on how UPI can become a game changer for cashless transactions. It is currently regarded as one of the big innovations in the payment models in banking.
In simple terms UPI is nothing but a virtual debit card on your mobile. The mobile device can be a channel to authenticate the transactions in a few steps and rather instantly. Over the last one year there was significant increase in the non-bank mobile transactions versus bank mobile transactions due to the payment wallet players like PayTM, PayU etc. The introduction of UPI will help bank restore that lost business in the coming year.
UPI payments work on the basis of unique ID called “virtual” address( also called as Payment address). The end customers can obtain many virtual addresses like abc@icici, abc@irtc, and other such aliases. The beauty of these virtual addresses is that, there can be several innovative usages built around these addresses – example, limit to specific payees, expiry of address for usage, amount restrictions etc. This will also help to build additional security and various authorization rules on top of the addresses. The Providers are expected to map the virtual addresses to the actual account at the appropriate stage.
Architecturally, the UPI can be envisaged as a unified layer that allows other channels like USSD, smartphones, internet banking on to a common layer at NPCI.
It provides a standard set of APIs that integrate the PSPs( Payment system Players) to APBS (Aadhaar Payment Bridge System), IMPS( Immediate Payment System), AEPS (Aadhaar Enabled Payment System), RuPay, ECOM, and NPS.
UPI provides significant value in taking existing systems to the next level. The Mobile devices will provide both the Authentication and Authorization for both Direct Pay ( User initiated payment – push) and Collect Pay ( Supplier Initiated Payment – pull).
Considering the increase in smartphone users in India expecting to hit around 500 Million in few years, UPI will create a significant impact on the cash-less traction in our society. Added, UPI being cheaper, secure, open standards based, it will open up lot of innovations in the marketplace.
While banks are expected to come up with their Apps for UPI, there can be lot of innovative Apps that can be built around this. It would be quite interesting to watch how pure-play wallet payment providers will embrace UPI and come up with their re-imagined Apps. Given that we are currently dealing with multiple such wallets and money parked/locked in each of them, and wider acceptability of these wallets are yet to be established, UPI introduction will bring in new approaches and business models for these wallets. Interesting to see Apple Pay and Android Pay value props with UPI.
We can expect single window Unified Mobile Payment App that hooks up to multiple bank accounts of the user, mapping to multiple virtual addresses, with biometric authentication over mobile. Users should be able to define their rules while creating these virtual addresses and manage. The Apps could also have additional field to store the virtual address for easy payment initiation right from the contact list.
Communicators and Messenger Apps like WhatsApp and Face book could enhance their Apps with UPI so that users can transaction whilst they are socially active over messages. Voice activated payments using Voice and Speaker recognition over mobile could be another possibility. The COD in ecommerce will simply be done over UPI Apps by scanning a QR code that is carried by the delivery agent at your door step.
As UPI roll out becomes operational, it will be good to see the economy transacting electronically than cash payments and use of currency to come down. We may begin to see vegetable vendors, new paper bills, being paid through UPI mode thus leaving behind Big Data transaction trails which will open up infinite possibilities of consumer analytics.
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