India gears up for mobile money for everyone through UPI

Platform will give very small borrowers a choice of lenders whom they can repay via mobile at the end of the day

In the next two years, a bank can lend a vegetable vendor of a few hundred rupees which she will be able to repay at the end of the day. All this will be done via mobile in a matter of a few minutes and in fact, she'll have a number of firms offering her loans allowing her to pick and choose the one that suits her the best.

One of the biggest pieces of the puzzle to make this possible, digital payments, will soon be accessible to players -- banks, lending firms, mobile wallets, to begin tinkering with and build their services. The unified payments interface (UPI) that's being built by the National Payments Corporation of India along with a bunch of volunteers, will be launched for testing tomorrow.

 

UPI will allow seamless movement of funds from one bank to another, from a bank to mobile wallet, mobile wallet to bank and mobile wallet to mobile wallet. One of the earliest adopters of the system has been India's largest mobile wallet firm Paytm, which in turn has boosted adoption by the competition due to the fear of being left out.

"We're building an ecosystem in this country. There's absolutely no doubt that we want to be identified as the people who brought in change," said Vijay Shekhar Sharma, co-founder and CEO of Paytm. "We believe we will be the significantly large beneficiary in this because consumers will be able to move money from their bank account to our wallet easily."

UPI is part of the technology backbone that has come to be known as "India Stack", a name given to the tech stack internally which just stuck. India Stack will enable consent, cashless payments, paperless and presence-less verification which will be crucial in making transactions such as the one mentioned above possible.

Over 942 million Aadhaar cards have been issued so far and that number could reach 1 billion people by March 2016. If Facebook founder Mark Zuckerberg is to believed, the turning point of any product is when it hits the billion user mark, and Aadhar is closing in on goal quickly. Aadhaar will be crucial for UPI to work and in turn both are necessary for India Stack.

So Paytm is not the only wallet betting on UPI. Rival Freecharge, owned by Snapdeal, Novopay, a firm that is run by former Aadhar chief technology officer Srikanth Nadhamuni and others are also betting on the shift.

"When inter bank settlement of cheques went online, it reduced time for cheque clearance from a month to one day. So the volumes just went up," said Govind Rajan, Chief Operating Officer, FreeCharge in a recent interview. "UPI will do that for e-payments and this will only the market grow and help India to become a less cash economy faster."

Over three hundred firms and individuals will be taking part in the hackathon that's organised at the launch event. Despite the Reserve Bank of India's (RBI) mandate that all financial service providers in the country should adopt the UPI standard within three years, no one is waiting. The haste in jumping onto enabling seamless digital transactions is being pushed thanks to players such as Paytm, Freecharge and a few banks too.

"It is a win-win situation for banks as well as customers. There will be loss of revenue when business goes to alternate channels, but the revenue pressure will actually help serve the customer better and in turn, retain them," said A P Hota, chief executive and managing director of National Payments Corporation of India (NPCI), in an earlier interview with Business Standard.