More than 21 banks went live with their "new app" last week. The apps use the infrastructure of Unified Payments Interface (UPI),which was developed by National Payments Corporation of India (NPCI). UPI has been the invention of Dr Raghuram Rajan, the RBI governor and is likely to make the Indian spender a lot less cash-dependent. Speaking about the launches of the NPCI-enabled UPI apps of banks, the MD and CEO of NPCI said, "This is a success of enormous significance. Real-time sending and receiving money through a mobile application at such a scale on interoperable basis had not been attempted anywhere else in the world." Clearly, this is a significant milestone in the history and evolution of India's financial system.
What will change significantly with the emergence of UPI?
Technology is making our life simpler day-by-day. Until recently, Indians preferred to pay in cash for petty expenses. You couldn't imagine yourself drawing a cheque to buy anything worth Rs 500 at your nearest department store. Debit and credit cards brought the revolution. They discouraged the use of cash to an extent as they offered some benefits to the user. Apart from the convenience they brought in, the benefits included cashbacks and exclusive merchandised discounts. If the cash dominated the payment preferences of people for centuries; debit and credit cards remained popular for decades. However, with the emergence of e-commerce websites such as Amazon, Flipkart, Paytm, and Snapdeal among others, other payment options such as electronic wallets emerged. Payment options such as net banking and e-wallets let you transfer cash, but there are limitations.
The option of Cash On Delivery (COD) provided by the e-commerce websites again made cash pretty relevant. Indians preferred physical inspection of goods before purchasing them. By promoting the COD option, e-commerce sites tried to win over the trust of buyers aiming to earn their loyalty. To transform any economy from a developing to an advanced one, it's imperative to make maximum transactions traceable. A high frequency of tax evasion and generation of huge unaccounted money is capable of dragging any budding economy down.
With the emergence of UPI, it seems all other payment options are likely to become less prominent in years to come, and COD is expected to become a history. While the "pay on delivery" option may continue, the buyer might use UPI to make real-time transfer rather than using cash. So it's likely to be a win-win situation for all.
More about UPI...
UPI functions on the similar lines as the Immediate Payment Service (IMPS) platform.This App may take the Indian banking system to the next level as it uses e-KYC. It makes customers' affirmations through a digital platform and also allows the use of digital signatures. It supports many real-time transactions.
Using UPI is a 5 step process. Here are the directions...
- Download the App from the Playstore
- Link the bank account to the App
- Create a Unique ID
- Link the Aadhaar to it
- Set a PIN
And you are ready to use the APP…
The real beauty of the UPI apps is that you need not be a bank customer to use its app. For example, if you want to use the UPI app of the Union Bank of India, you need not hold an account with it. You have to create a virtual id and link your bank account to it. For example, if you are using the app of UCO bank then your virtual ID can be "yourname@UCO". Unlike in the net banking option, you need not disclose any sensitive and difficult-to-remember information such as a 15 digit account number or IFSC code. This virtual ID becomes your identity to anyone transacting with you, and the app doesn't require more information to allow you to send and receive money. You can also pay bills and request cash using UPI Apps. Advanced options such as scan and pay are also available.
Initial hiccups…
While some banks have worked on the aesthetics of the app more than others, almost all of them failed to function smoothly. Some apps fail in getting you registered while others fail in linking your account. Unavailability of some prominent banks such as HDFC Bank and Kotak Mahindra Bank to name a few on the UPI platform will make it difficult for those who just have one account in their name and that too with these banks. Although there are more than 100 banks that offer IMPS facility, there are only 21 banks on the UPI platform so far. However, it is expected that other banks will join the programme by March 2017.
Of course, these are initial phases and the performance of the apps may improve substantially in the near future as the developers of the apps start working on the shortcomings based on the customers' feedback.
On the positive side, these apps don't consume much data and space, and they are easy to operate. Most of them would use up anywhere between 5 MB to 13 MB of space. Some of them allow you to have just a 4-digit numeric password for the accessing account, while others have provided more safety measures such as a more complex password involving one uppercase alphabet, one lowercase alphabet, a number and a unique character, in addition to having a safety question.
Furthermore, if your mobile number is mapped to more than one client id in the same bank, the request for registration will be declined by the bank. You will have to de-link all other accounts except the one you intend to link with UPI. So for example, you hold an individual account with "ABC Bank" and a joint account with your spouse in the same bank wherein you have linked your own mobile number, your request for enlisting any of these accounts with UPI will be declined. This is likely to create a practical difficulty for many.
A word of caution…
If you store your password and lose your phone, the possibility of someone making the misuse of UPI app can't be ruled out since even the One Time Password (OTP) is sent to the same phone number. Moreover, when you accept the terms and conditions when installing the app, please don't forget to check once as to what all functions and information you are agreeing to share with the app. In the case of any legal battle, this may be used as proof.
PersonalFN is of the view that, UPI is a revolutionary step in the right direction. However, unless more people use this platform actively, it's unlikely to achieve its primary objective of making maximum transactions traceable and reducing the cash circulation in the economy. The banks may have to offer some incentives like they offered to make card payment options attractive, to encourage people to choose the app-based real-time payment options. An individual who possesses black money would still continue to use cash unless there's some incentive for not using cash.
While using UPI apps to make routine payments, monitor your expenses closely and spend on necessities only. Remember, every penny saved is a penny earned.
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