The current Indian Government has been giving a big push to Digital Payments in the world’s fastest growing economy. UPI or the Unified Payments System is a payment method that allows using multiple bank accounts through a single mobile app. Seamless fund transfer, availability of almost all normal banking features, ‘peer to peer’ fund requests, merchant payments and interoperability, all these are the features that make UPI an impressive payment mechanism for most of the country’s digital users.
Many of the country’s new age start-ups have opted for UPI as a payment method for their services, and some global players operating in the country have also opted for it. Recently, Amazon has come up with its UPI based payment platform for its users. Along with this, users can enjoy various Amazon offers. Its local rival, Flipkart, is already offering this service to its customers through its PhonePe app. While Google uses UPI for its Google Tez payments app, other Indian ventures like Grofers and Ola have also used the system.
Modi Government’s bet on UPI to reduce the dependence on cash in the country has paid off very well. As per the data on NPCI (National Payments Corporation of India) website, there are 86 banks that are live of UPI mechanism, with a transaction value of more than INR 19000 crores so far. Its growth has been much higher than any other payments method, be it e-wallets, net banking or anything else.
Although Credit Cards and Debit Cards are a payment method that is used by myriad of people worldwide, India’s UPI offers an advantage over these. To use a debit card or a credit card, a user has to remember details like CVV number, expiration date of the card and of course the number of the card itself. Moreover, one has to wait for the OTP or the One-Time-Password as well, the late arrival of which can be an exasperating affair. But with UPI, such problem does not exist. All one needs is a smartphone with an internet connection and the MPIN, along with receiver’s payment address. No dates, no OTP and no lags.
Easier usability than Net Banking
Net Banking has been adopted by many urban users of the country, but the adoption rate of this method has not been very impressive. According to a report released by Facebook and Boston Consulting Group in June 2017, the number of Net Banking users in India is a dismal 45 million only. While the number is expected to 150 million by 2020, but one feature that gives UPI the upper hand is the login requirement of net banking. For using net banking one needs to login every time for a transaction, which is not the case with UPI. Also, for net banking, one usually needs a larger computing device like a personal computer, a laptop or may be a tablet. In a country where majority of the users browse internet on mobile phones, this factor gives a big edge to UPI over net banking.
Much ahead of E-Wallets in the Race
E-Wallets have been doing a lot of efforts to introduce digital payments to new users and towards increasing the volumes of digital payments, but UPI still seems to be much ahead of these in the race. A number of factors make UPI better than e-wallets. One of these is the limit of monthly value of transactions. While the limit for non-KYC compliant wallet users is from INR 10,000 to 20,000 (depending upon the wallet), the limit for UPI users is INR 1 lakh. Therefore, the users with higher transaction value find UPI a more comfortable option than e-wallets.
Also, most of the wallets do not allow sending money back to the bank once it’s loaded in the wallet, which is another big negative point.
Recently, an order by RBI to make all e-wallets KYC compliant has also proved to be a bad news for the service providers. The sluggish attitude of Indian users towards making their wallet KYC compliant has become a point of worry for wallet companies. Some reports even say that the wallets might lose 30 to 40 percent of their user base permanently, due to this norm.
One more feature that makes UPI better than e-wallets is interoperability. UPI is completely interoperable, while as we talk, no wallet is interoperable. Although some active discussions are going on and users can expect wallets to become interoperable soon, but as of now, UPI gets an edge over wallets due to this feature.