What is UPI
It is an
interbank payment system in India where money can be transferred from a bank
account to any other account held with any bank in the network instantaneously.
Round the clock every day of the year. upi
app download facilitates both Credit Push as well as Debit Pull transactions.
Never mind the Bankers’ gobbledygook. It
only means one can initiate a payment transaction and even receive a payment
request on one’s mobile phone. Over 100 banks in India are expected to
participate in UPI bringing in hundreds of millions of customers seamlessly
into a common nationwide payment system.
How it Works
Banks can
play three distinct roles in this payment system. At the heart is a role where
a bank, acting as a Payment System Provider (PSP), offers a mobile application
which can be downloaded and used by customers of any other participating banks.
The basic but the most crucial is a role where every bank in the network has to
allow its customers to link their accounts with any of the PSP banks’ mobile
applications. This is called an Issuer role. Issuing bank will receive
encrypted MPIN and accept debit request in the linked accounts. The third role
is of a market maker where a bank acting as an Acquiring bank facilitates
merchants to collect payments. A bank has to join the network as an Issuer.
Roles of a bank as a PSP or an Acquirer are optional.
Let’s assume
a customer named Suresh who has an account with “MyBank”. But MyBank is only an
Issuer. So Suresh downloads a mobile application provided by an ”OtherBank”.
Once Suresh links his MyBank account on the OtherBank mobile app, he creates a
handle for himself. If Suresh is lucky he can call his handle Suresh@OtherBank.
Now using this handle Suresh@MyBank can send, receive and even collect money to
& from AnyCustomer@AnyBank. Voila. Now you have hundreds of millions of
customers making payments to each other. They can be customers sending money
orders to other customers or making payments to merchants. They can even be
merchants making or receiving payments to other merchants.
Pardon the Spiel
If you are
not a banker and have still survived the first three paras then let me not
further test your patience. I hope you will pardon the spiel. But I had
to narrate the plot before I could begin to tell the story.
But we have Cards
A lot of
people have brushed off UPI saying, there are already cards! Why on Earth do
you need a UPI or whatever”?. One needs
to scratch the surface just a bit to look for an answer. It is easy but not
obvious. Take a look at the cards in India.
The latest data from RBI shows that there are 24 million Credit Cards
and 660 million Debit Cards for a population of 1.3 billion in India. Of these, Credit Cards clock in 2.7 merchant
payments per credit card per month and Debit Cards chip in with 1.8 merchant
payments per debit card per year. This is not a proof reading error. But this
data means a) there aren’t enough Credit Cards and b) not enough customers are
making payments to the merchants using their Debit Cards. Contrast this with almost
a billion mobile phones.
I have seen
in almost all developed countries Mobile Payments equal payments made by the
linked cards. So you have mobile phones where credit card information is stored
to make payments using Near Frequency Communication (NFC) or a Quick Response
(QR) code. But when you don’t have enough cards or enough people who use cards
to pay, this ain’t no good in India.
And we have Mobile Wallets too
Now I am
going to stick my neck out and say Wallets is a different story altogether. They
are hep, they are trendy, they are cool too. They are also a great way to
promote brand for a Merchant. But there are too many of them. Spare a thought
for the customer. What does she do if every high street store and every e
commerce merchant offers a mobile Wallet each?
And Wallets tend to work in silos. Rare are the chances that a customer
can use balance in the wallet issued by Merchant A to shop at the Merchant
B. Wallets don’t earn you interest on
the balances either.
What guarantee, UPI will work?
Nope. I
can’t offer one. But as they say, the proof of the pudding is in eating. The
banks and their customers are about to start eating theirs, here in India. For
starters it is safe. The unique ID or finger print of the mobile handset and
the handle chosen by a customer together form a strong factor of
authentication. Besides, every
transaction is authorised by the customer using an MPIN. This eliminates the
apprehension of the customers in India of card data getting stolen or the card
getting cloned. Second, customers can pay in real time with just a click and an
MPIN whether they are paying to a friend a thousand miles away or shopping at a
high street store. This is because upi app download will allow them to make payments
remotely from anywhere or even over the counter. Third, customers won’t need to
take money out from their bank accounts to keep lying idle in multiple wallets.
Fourth, all they need is a smart phone and a bank account. In a nutshell the
ingredients are right and the recipe is perfect. Chances are so will be the
Pudding.
Source:[https://goo.gl/G05iBV]
