 "How UPI may score over IMPS for making mobile payments")
The new Unified Payments Interface (UPI) by National Payments Corporation of India is expected to make mobile payments much easier. But, there is an obvious question: What will UPI change? The question becomes all the more important because it also uses the same Immediate Payment Service (IMPS) platform that all existing mobile payment platforms already use.
Let's understand the difference. UPI plays the crucial role of the central registry, enabling complicated account information to be converted into a simple address. So, instead of sending a payment to Harsh Vardhan Roongta, Account No: 99999999999 with XYZ bank, Mumbai branch (IFSC code: XYZO09999), you can simply send the payment to harsh@xyzbank. The central registry will convert this into the information needed to make a transfer. This simplification can mean almost anybody will be able to provide their bank account information in an easily understandable manner.
The second big thing is that UPI will enable people to request for payments. Today, if you owe me money, it still requires an action on your part to send me the money. You have to key in the information as above, along with the amount, to enable the payment to go through. Now, imagine instead of pestering you for money over e-mail or phone calls, I were to send a collection request to your bank account that comes on your mobile, and if you approve (and provide a password), the payment is automatically made. If you don't approve the collection request, I know you don't really want to make the payment. This facility of receiving payments makes things very easy.
Imagine, your vegetable vendor sending you a request for making payment for the vegetables you just bought for say, Rs 82, and you approve it on the spot and the payment going through. The vendor hands over the vegetables to you as he receives confirmation of the payment in his account within seconds of your making the approval.
No issues about exact change, torn or counterfeit notes or having forgotten your purse at home.
With the Jan-Dhan Yojana ensuring almost everybody has a bank account, and if all of them start using the system to make and receive payments, we can probably have a situation where we can forget dealing in cash.
Of course, all this will require the entire system to stabilise around the UPI infrastructure. The other major issue will be around transaction charges for such payments and who will bear it. The government has made it clear that it will ensure the transaction charges are not a hindrance for online payments, which has several spin-off benefits for the economy. How much and who bears the transaction charges will decide how popular mobile payments will be in the country.
There is no doubt that the UPI project is a national infrastructure project akin to a railway line connecting a hitherto unconnected part of the country. I am sure everyone should be enthused by its success.
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Let's understand the difference. UPI plays the crucial role of the central registry, enabling complicated account information to be converted into a simple address. So, instead of sending a payment to Harsh Vardhan Roongta, Account No: 99999999999 with XYZ bank, Mumbai branch (IFSC code: XYZO09999), you can simply send the payment to harsh@xyzbank. The central registry will convert this into the information needed to make a transfer. This simplification can mean almost anybody will be able to provide their bank account information in an easily understandable manner.
The second big thing is that UPI will enable people to request for payments. Today, if you owe me money, it still requires an action on your part to send me the money. You have to key in the information as above, along with the amount, to enable the payment to go through. Now, imagine instead of pestering you for money over e-mail or phone calls, I were to send a collection request to your bank account that comes on your mobile, and if you approve (and provide a password), the payment is automatically made. If you don't approve the collection request, I know you don't really want to make the payment. This facility of receiving payments makes things very easy.
Imagine, your vegetable vendor sending you a request for making payment for the vegetables you just bought for say, Rs 82, and you approve it on the spot and the payment going through. The vendor hands over the vegetables to you as he receives confirmation of the payment in his account within seconds of your making the approval.
No issues about exact change, torn or counterfeit notes or having forgotten your purse at home.
With the Jan-Dhan Yojana ensuring almost everybody has a bank account, and if all of them start using the system to make and receive payments, we can probably have a situation where we can forget dealing in cash.
Of course, all this will require the entire system to stabilise around the UPI infrastructure. The other major issue will be around transaction charges for such payments and who will bear it. The government has made it clear that it will ensure the transaction charges are not a hindrance for online payments, which has several spin-off benefits for the economy. How much and who bears the transaction charges will decide how popular mobile payments will be in the country.
There is no doubt that the UPI project is a national infrastructure project akin to a railway line connecting a hitherto unconnected part of the country. I am sure everyone should be enthused by its success.
The writer is a Sebi-registered investment advisor