As the digital revolution took over the regular life of people by storm, there are not many areas that remain uninterrupted by it. With the huge impetus given to Digital India by the Government of India, the domain of finance and accounting has also undergone tremendous changes.
Beginning with online payment with the help of UPI, it has gone to newer avenues, wherein digital platforms offer credits to the user. It is widely called digital lending. Using the technology of credit assessment and authentication, websites and apps these days allow their users to lend money. Today, banks are not far behind in this domain. They have come up with their own digital lending platforms. Their experience in traditional lending further gives them the edge to sustain themselves in the market.
In India, a large section of the society depends on the unorganized sector for credit which cracks down on poor farmers and micro enterprises with their high rate of interest. In that regard, the popularity of digital lending has, in fact, bought in financial inclusion meeting the hitherto unmet credit requirements of the people. As digital lending got more popular, it became necessary to keep a check on the activities that are taking place in this domain.
The Reserve Bank of India, in August 2022 released guidelines on digital lending so as to ensure the smooth and safe conduct of transactions through digital platforms. This article will look at important parts and implications of the guidelines issued.
The Reserve Bank of India has issued these guidelines keeping in mind the lending ecosystem of Regulated Entities (RE) and Lending Service Providers (LSP). They have classified digital lenders into three different groups. Firstly, those entities that are regulated by the Reserve Bank of India for lending business in itself.
Secondly, those entities authorized to carry out lending are based on the statutes and regulatory provisions of certain other bodies but are not managed by the RBI.
The third groups include those entities that are outside the purview of any kind of regulatory or statutory provisions.
All those lending groups that do not come within the discretion of the above-mentioned categories are free to formulate their own rules and regulations alluding to the recommendations of the working group.
Let’s take a brief look into the highlighting aspects of the guidelines:
Payments
The guideline mandates that all digital transactions should be made between the bank accounts of the regulated entity and the borrower. It should not include any third party or pool account. When they say Regulated Entity, it means any banking or non-banking financial company.
With regard to the payment of fees during the credit intermediation process, the guidelines clarify that the payment is not to be made by the borrower but should be made by the Non-Banking Financial Companies (NBFCs) i.e, the regulated entities.
If at all there are any penal interest or charges, they are to be disclosed in the key fact statement (KFS) on an annual basis and should be based on the outstanding amount of the loan.
Data Privacy
Data Breaches Worldwide
Data privacy is one of the most concerning thoughts in today’s digital world. The guidelines carefully address this issue by delineating that the usage of user information should be need-based. The digital lending platforms are barred from accessing the user’s files, contact lists, call logs, media, and other telephonic functions.
However, they can have one-time access to their camera and microphone to complete their KYC procedures. This will be possible only after the explicit consent of the customer. Additionally, the guideline also states that the user has the option to deny access to certain data, restrict disclosure of certain information to any third party and deny data retention. The user can also revoke the consent given later if they feel so. They can also delete the application and forget the data when it is being uninstalled or deleted.
While signing up, the digital lending platform needs to disclose the credit limit information related to product features and the related costs. It includes the disclosure of the all-inclusive costs of digital loans in the form of Annual Percentage Rates (APRs). The guidelines also prohibit these platforms from increasing the credit limit without the consent of the borrower.
Reporting Lending to CICs
Any form of lending carried out through Digital Lending Applications (DLAs) of RE or LSPs is to be reported to the Credit Information Companies (CICs) irrespective of their tenure or nature.
The guidelines extend these requirements even to those lending carried out through Buy Now Pay Later model. This is with regard to the provisions of the Credit Information Companies (CIC) Regulation Act, 2005, issued by the Reserve Bank of India at regular intervals.
Options to Exit Loans
The RBI guidelines give the user an option to exit the availed digital loan by paying only the principal and proportionate APR without paying any fine within a stipulated time called the cooling-off period or look-up period. The cooling-off time is determined by the boards of the respective regulating entities. Such a time period should not be less than three days for loans having a tenure of seven days or more and one day for loans having a tenure of fewer than seven days. For those borrowers, who continue even after this period, the provisions of pre-payment will be continued based on the extant RBI guidelines.
Grievance Redressal
Every Regulated Entity (RE) and Lending Service Provider is required to appoint a grievance redressal officer. They are supposed to address the FinTech and Digital lending-related complaints issues, faced by the customers.
Apart from that, the issues related to one’s own Digital Lending Applications are also to be addressed by the officer. Apart from facilitating the option to lodge complaints, the contact details of the respective nodal grievance redressal officer have to be visibly displayed on the website of the regulated entity.
To further foolproof the grievance redressal system, RBI allows the user to file complaints through the Complaint Management System (CMS) portal under the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS) in case the complaint is not resolved within 30 days of filing.
The development of technology services has tremendously contributed to the mushrooming of Digital Lending Services, which gained quick popularity among the young and middle-aged population alike. While such schemes have been helpful to a lot of people, it has also resulted in many unethical and fraudulent practices, wherein users get scammed.
Apart from that, various platforms also use this service as a way to charge exorbitant interest rates from users. It is in such a context that the guidelines released by the RBI become all the more relevant. There was a need to manage and control the proliferation of this budding service. These guidelines will ensure that lending through digital platforms happens responsibly wherein both the parties benefit from the advancement of fintech facilities.
FAQs
When and where was RBI established?
The Reserve Bank of India was established on 1st April 1935, in Kolkata.
Where is the central office of RBI?
RBI headquarters is currently located in Mumbai after it was shifted from Kolkata in 1937.
Who is the current governor of RBI?
Shaktikanta Das is the present governor of RBI.
When did RBI release Guidelines for Digital Lending?
RBI released the Guidelines for Digital Lending in August 2022.
The unified payments interface is the buzzword for the pandemic year. Ever since the pandemic hit, people became scared of touching any surface in the world. This was the time when the UPI came to the rescue. UPI or the unified payments interface is a method or gateway that is capable of transferring money from one bank to the other. This is a life saviour in a country like India. We are a country of more than a billion people and everyone has to do certain basic transactions everyday.
With so many transactions happening all over the country, it becomes hard and inconvenient. UPI eases just that thing. It lets you pay directly from your bank and you don’t have to carry notes and currency of small denominations and even larger denominations. In all its sense, UPI was a game-changer in India. It is fast, safe, easy and convenient.
There was however some issue over the UPI case in India. You cannot transfer money outside the borders of India. For that, you will have to follow some other method of transaction. In recent news, it was announced that Nepal (India’s neighbour) will accept the UPI payments from India. In fact, it will be the first country that will adopt the UPI system that India has inbuilt in itself. This step will be playing a pivotal role in transforming digital work all over the place, in India and as well as in Nepal. It was officially announced by the NPCI on Thursday, last week.
NPCI stands for National payments corporation of India. Here we will be discussing Nepal, which is India’s friend and all in all aspects. In this article, we will also discuss what will be the after-effects of this news. How will the fintech startups change, will this be a better move for them or will the move give them a hard time. Let us see first how the UPI works, and why it is so widely used.
A Small Brief About the Unified Payments Interface
We have invented so much, achieved so much and we are still in the process of innovating and adding value to the world. However, any amount of technology in the world is of no use, if it cannot ease the life of humans. Because what’s the matter if tech is useless? When the population rises to a great extent, something has to be invented which will work efficiently in managing human affairs.
In fact, as the population of the world rises, there has to be something that holds the number of transactions happening everywhere. This is when the word digital payment came into the picture. It is a mode of payment that is made via Digital means. Real money is flown out of a payer’s bank and is credited to the receiver’s bank. This is also a fast, easy and secure method to transact.
In a country like India, where the population bubble is so huge, it becomes crucial to innovate in the medium of transactions. This is when the word UPI comes to place. There is a strong possibility that someone has not heard of this word beforehand.
UPI or Unified Payment Interface is a digital payments service that costs nothing to the payer and receiver but makes it easy for both parties. It is a payments service and as the name suggests, it is a pathway through which money can be transferred to anyone in India.
It is the most accepted digital payments method. Since the demonetisation and the covid 19 pandemic, the use cases of UPI has also risen many folds. Which makes it the perfect go-to pathway for any sort of transaction.
It is developed by NPCI, which stands for National Payments Corporation of India. It is safe and secure as it is regulated by the Reserve Bank of India. RBI is the Apex bank in India, which is also the central bank of India. It regulates and secures every UPI transaction happening in the country. It is secure in this manner.
Another thing is that UPI is simple and convenient. All it takes is a mobile number and a bank account. It connects with your email id which is used to make a VPA ID. VPA is a virtual payments address.
As the name suggests, it is the online address to which payments are directed or payments are taken. VPA is something that directs the payment/transaction path. Transfers can be inter-bank and they can also be intra-bank. A mobile number also works seamlessly in the UPI payment system, if it is attached/linked with the bank account of the sender or receiver.
There are many benefits for a service like the UPI. But however, there is one limit to a UPI transaction. You cannot do a UPI payment across borders as it is only available in India. In recent news, something striking happened. It was reported that Nepal will be accepting the UPI structure of India. It is such a great welcoming move by which people can transact even in Nepal from a UPI enabled app. Let us see what is the news and what will be its implications.
India Nepal UPI Collaboration
In recent news, it was announced that Nepal will be accepting UPI which is a great initiative for development in both the countries, India and Nepal. In fact, it will become the first country to do this. The country said that they want to adopt India’s payment gateway for growing together.
NCPI has also given a nod to this agreement. Its foreign wing has joined hands with another technology entity to provide services in Nepal. The work of providing the infrastructure for this facility will begin soon in time.
NPCI International, Gateway Payment Service, and Manam Infotech, all three trifectas have come together and joined hands to deploy UPI solutions in Nepal. NPCI International Payments Ltd (NIPL) is all set to Enable NPCI’s flagship Unified Payments Interface(UPI) platform in Nepal.
This partnership or collaboration will enable many developments, like the creation of a real-time payments system in Nepal, leveraging NPCI’s top of the line or state of the art technology to democratise payments and displace cash
NCPI has come together and joined hands with GPS and Manam Infotech to provide services relating to the Unified Payments Interface to the country of Nepal. GPS here stands for Gateway Payments Services and Manam is a famous tech company on the land of Nepal. It has been clearly stated that GPS or Gateway payment service will be responsible for acting as a system operator for payments in Nepal.
Manam infotech will add the Unified Payments Interface to the whole country. It is a divided work and with the joint efforts of the respected bodies, this work will be done in an effective manner.
The collaboration will also make for the larger digital public good in Nepal. This effort on both ends will improve real-time person-to-person which is called P2P and person-to-merchant which is P2M transactions in the neighbouring country, NPCI said in a statement.
There have been rising sentiments of all the people who see UPI as a great initiative in a digital world. With Nepal joining hands with India, this will boost the usage of UPI and it will also promote the digital economy which everyone today strives to become. Moreover, this broad use of UPI will also bring these two countries together in the same sphere of payments.
As merchants and consumers from both countries will get benefits from this collaboration. Payments can be received and accepted from both countries which will make trade and communication easier on both ends of the locations.
With collaboration with Nepal, we can achieve a greater goal of merging the two economies, not exactly but the magnitude will rise in both places. As the collaboration will start working, it will also be seen that person to person and person to merchant transactions will also improve the number of countries. National payments corporation of India and investors and merchants are all looking forward to all the doors of opportunities that will be open after this collaboration on UPI.
National payments corporation and NIPL (International payments limited) which is its foreign wing, was incorporated in April 2020. The NIPL is a wholly-owned subsidiary of the national payments corporation of India. The sole purpose of NPCI is to regulate all the UPI payments in India.
Everything that is related to the Unified payment interface in India is to be managed by this entity. The foreign department of NPCI is known as NIPL and operates in connecting UPI outside Indian borders. The purpose of NIPL is to employ a payment system that is real-time, with the international markets. It has also the work of card schemes and RuPay which works outside Indian borders.
NPCI or the national payments corporation of India has developed and proved its capabilities in the past. It is the organisation that has the majority stakes in working overtime with the UPI in India.
The widespread usage of the Unified payments interface would not be possible, had it not been with the NPCI. Thus, this body has been the worthy organisation to regulate and promote UPI in Indian markets. The international wing of NPCI has also done immense work in its designated part. NIPL is focused on transforming payments across the globe with the use of technology and innovation
Nepal has a population of about 30 million (3 crore) with around 45 per cent banked. Mobile penetration of over 135 per cent with 65 percent of the population using smartphones provides a bedrock for seamless replication of the digital revolution in India to be replicated in Nepal, NPCI said.
NPCI International, Gateway Payment Service, and Manam Infotech. The trifecta has come to deploy UPI solutions in Nepal. This partnership or collaboration will enable many consequences, like the creation of a real-time payments system in Nepal, leveraging NPCI’s top of the line or state of the art technology to democratise payments and displace cash. NPCI International Payments Ltd (NIPL) is all set to Enable NPCI’s flagship Unified Payments Interface(UPI) platform in Nepal.
Conversely, several countries want to establish a ‘real-time payment system’ or ‘domestic card scheme’ in their own country. NIPL, with its knowledge and experience, can offer these countries technological assistance through licensing, consulting for building real-time payment systems to meet the rapidly evolving need of fast-growing global businesses. It will not only enable payment for Indians but also uplift other countries by enhancing their payment capabilities through technological assistance, consulting, and infrastructure.
As mentioned before, NPCI is the governing body when it comes to any case related to UPI. NPCI stands for National payments corporation India. In this case, when Nepal is agreeing to add UPI in their country, NPCI has to nod. To this query, it is amazing to see that NPCI has agreed to the partnership which will improve payments in both geographies. The foreign/international wing of the national payments corporation of India has cleared any issues related to the collaborations.
NIPL which is National international payments Ltd, which is the foreign department of the National payments corporation of India has joined with some organisations to provide UPI to the international market. In this case, where Nepal will become the first-ever country to get the UPI as their payments gateway, NIPL has planned everything which they will be needing.
They have joined two other entities to fulfil their mission of enabling UPI in Nepal. The two bodies are the GPS and Manam. GPS stands for gateway payments service and the other entity is Manam Infotech. Enabling the Unified Payments Interface in Nepal, which is not an easy task, requires a lot of work and efficiency. These two entities with which the NIPL has collaborated, are well versed with the world of UPI and how it operates.
Gateway Payments Service will be the payment system operator in Nepal. The other company, that is Manam Infotech will be responsible for employing Unified Payments Interface in the neighbour to India.
The collaboration will serve the larger digital public good in Nepal and bolster interoperable real-time person-to-person (P2P) and person-to-merchant (P2M) transactions in the neighbouring country, NPCI said in a statement.
“Nepal shall be the first country outside of India to adopt UPI as the payments platform driving the digitalization of cash transactions and furthering the vision and objectives of the Nepal Government and Nepal Rastra Bank as the Central bank,” it said.
This collaboration will enable the last-mile consumers in Nepal to reap the benefits of an open interoperable payments system driving immediate payment transfers between bank accounts and merchant payments in real-time.
Among all the news of Nepal accepting Unified payment interface as their go-to transacting pathway, one entity is in charge of the settings. You guessed it right, it is Manam Infotech private limited.
Manam infotech will be the responsible body for enabling UPI technology and operations in India. It will work very closely and parallel to the GPS. GPS or Gateway payments service is the service that is entrusted with the responsibility of maintaining the pathway.
Nepal shall be the first country outside of India to adopt UPI as the payments platform driving the digitalisation of cash transactions and furthering the vision and objectives of the Nepal Government and Nepal Rastra Bank as the Central bank.
“Manam has always been part of major digital transformation across the various regions of the world, we believe this partnership will eliminate all the barriers of payment transformation within Nepal and across the border thereby transforming the regional economy,” Naga Babu Ramineni, Director of Manam said.
Manam Infotech Private Limited is a very repeated name in the article and it is worthy to be named many times. Manam Infotech is a Fintech (Finance plus technology) company based out of Bangalore, India.
Manam Infotech is the fintech arm for many leading banks across various regions. The regions in which Manam infotech works fabulously includes Asia, Africa and the Middle East. The company stands tall with over a decade of experience in digital wallets, payments, and all the omnipresent banking and digital lending. Manam Infotech has also been a part of transforming the traditional banks to digital-first banks, which was the primary focus of the government for a long time now.
What is the Gateway Payment Service (GPS)?
Another name that we have repeated in this article is GPS or the gateway payment service. GPS is a payment system operator with expertise in all the works relating to payment services and operators. It is to its core a PSO or a payment system operator.
It is licensed by NRB, which stands for Nepal Rastra Bank, which is the apex bank in the country (Central Bank of Nepal). It has been allowed a PSO licence which enables the entity to work and operate in all sorts of payment and transaction settlement-related technology.
GPS has all the rights that include all that of payment gateway, domestic and international gateway, with UPI, that is unified payments interface in switch and in card transactions.
Benefits of UPI collaboration in Nepal
The benefits that this collaboration entails are endless. The collaboration will help people build real-time money connections with the country without having to go through the hassle of other payment methods. This UPI partnership will be real-time and it will be capable of crossing borders.
All person to person money transactions and remittances between India and Nepal will flow like water. Not just person to person transactions but all the transactions related to the merchant’s part will be carried out effectively if this collaboration gets realised.
The benefits are endless, as UPI is one of the most famous methods of payment in India. India is the second-most populous country in the world and UPI is a hit here. With all the volume of transactions that are received from here, it will benefit a lot from Nepal and it will add a good amount of transactions to Nepal too.
In 2021, UPI enabled 39 Billion financial transactions amounting to commerce worth USD 940 Billion, which is equivalent to approximately 31% of India’s GDP. UPI’s real-time payment infrastructure will help catalyse the process of financial inclusion in Nepal and will also create more opportunities for businesses. It will help modernise Nepal’s digital payment infrastructure and bring the convenience of digital payments to citizens of Nepal.
Ritesh Shukla, CEO of NIPL said, “We are delighted to join hands with GPS and Manam Infotech to facilitate the deployment of NPCI’s flagship Unified Payments Interface in Nepal. At NIPL, we are committed to transforming payments by taking our robust payments solutions to global markets and collaborating with local payment system operators. We are excited about this partnership, which will enable consumers within Nepal to transact swiftly using a state-of-the-art UPI platform and deliver a seamless user experience. We are confident that this initiative will stand as a testimony to NAPLes technological capabilities and vision of scaling our unique offerings globally.”
Naga Babu Ramineni, Director of Manam said, “Manam has always been part of major digital transformation across the various regions of the world, we believe this partnership will eliminate all the barriers of payment transformation within Nepal and across the border thereby transforming the regional economy.”
Rajesh Prasad Manandhar, CEO of GPS said, “The same UPI service has created a significant positive impact in India in terms of the country’s digital payment transformation. We expect UPI in Nepal would play a pivotal role in transforming the digital economy of the country and dreams of building a less-cash society.”
How Will UPI Be Implemented in Nepal?
The neighbouring country of India, Nepal has good population stats. Out of all the population of Nepal, about 45 percent have bank accounts. That 45 percent account for something about 30 million people. Mobile penetration in Nepal is over 135 percent.
Moreover, it is reported that 65 percent of the population uses smartphones which will provide a good base for UPI payments. Not only this, the three major companies will work towards increasing the volume of transactions.
The three companies we are mentioning here are the UPI backed service providers. It is NPCI, National payments corporations of India, GPS, Gateway payment services, and Manam Infotech. All these three companies will work together to employ all the necessary equipment to make Unified payments accessible in Nepal all over the place.
It will also enable the way forward for real-time cross-border P2P remittances between Nepal and India, NPCI said. UPI service has created a significant positive impact in India in terms of the country’s digital payment transformation, Rajesh Prasad Manandhar, CEO of GPS said.
“We expect UPI in Nepal would play a pivotal role in transforming the digital economy of the country and dreams of building a less-cash society,” he added.
In 2021, UPI enabled 3,900 crore financial transactions valuing USD 940 billion, which is equivalent to approximately 31 per cent of India’s GDP. NIPL, being an internationally focused subsidiary of NPCI, is looking to drive deep collaboration with overseas partners in the areas of UPI like deployment, cross-border remittance, acceptance, using indigenously developed technologies in digital payments.
“At NIPL, we are committed to transforming payments by taking our robust payments solutions to global markets and collaborating with local payment system operators. We are confident that this initiative will stand as a testimony to NAPLes technological capabilities and vision of scaling our unique offerings globally,” Ritesh Shukla, CEO of NIPL said in the statement.
UPI’s real-time payment infrastructure will help catalyse the process of financial inclusion in Nepal and will also create more opportunities for businesses, NPCI said.
NIPL, being an internationally focused subsidiary of NPCI, is looking to drive deep collaboration with overseas partners in the areas of UPI like deployment, cross-border remittance, acceptance, using indigenously developed technologies in digital payments, NCPI said.
All the three organisations have nodded to set up a laid out plan in this path. They will be working together in a closely-knit target and process that will enable UPI in Nepal.
The benefits, as previously mentioned are countless. There will be ease in transactions of any sort, people and merchants will be the group of people who will be the first and foremost most affected in a good sense.
In short, it is a great move and that is why the NPCI and the concerned authorities nodded directly to the proposed news. This move is looked at as a win-win for both countries.
UPI is amongst the most successful real-time payments (RTP) systems globally, providing – simplicity, safety, and security in P2P and P2M transactions in India. It is the most popular payment mechanism in India and the recent news said that Nepal will also be accepting this. This is a great move and will benefit both countries in transactions. The better the volume of transactions, the better will it indicate and benefit the growth of the country.
The benefits are endless and will help all the people across the borders who indulge in regular payments across larger boundaries of the land.
FAQs
Is UPI made in India?
Yes, the UPI platform and technology is designed in India and is regulated by RBI.
Who regulates UPI in India?
The Reserve Bank of India (RBI) regulates UPI in India.
How many UPI users are there in India?
There are around 300 million active monthly users of UPI in India.
There is a high chance that you don’t remember the last time you used ‘cash’ for a transaction at a Kirana store. The world is changing and it is becoming cashless, not a new thing but more like the new normal.
The shift from cash to cashless is so welcomed all over the world that it has become the new normal. Tech in transactions is the most in-demand technology and has proved to be really penetrative in every society.
The most famous technology is the UPI. It stands for Unified Payments Interface. It is the most favourite bridge that enables transactions all over India. We all know this and we see just this aspect of the story. However, that is not all. Behind the scenes, a lot of fights happen for customers and numbers. UPI apps are almost always constantly at war. In this article, we talk about these apps and what is the issue that they deal with. But first, the basics.
UPI or the Unified Payments Interface is the most famous bridge of transactions in India. It is fast and secure which makes it the perfect alternative for cash. Handling cash is hard, handing a UPI is not hard at all.
Immense growth was led by UPI last year, which recorded more than INR 73 Lakh Crores in 2021. Moreover, a year-on-year rise of over 110% as opposed to INR 33.87 Lakh Crores transaction in 2020.
UPI is a system that has the ability to attach multiple bank accounts with a smartphone application. That application can be later used to transact with the bank that the user uses. This makes it easy to go cashless when your bank account is linked to the UPI app in your pocket. It’s like taking the bank in your pocket.
Benefits of UPI
You can send money almost immediately through any smart device and even a basic buttoned device.
UPI is available at any hour and any day of the year.
As the name suggests, UPI is a unified payment method that enables a user to add more than one bank account to the application.
2FA is more than easy in this process. 2 FA stands for two-factor authentication which is easily managed with a UPI pin along with the inbuilt app pin.
UPI is easy because it saves you the time of writing details like Card number, IFSC code and all the bank page clutter.
Total Transactions of UPI Apps in India
UPI is the future of payments, or should we say the smart present of payments. The numbers point in this direction as well. We see that just in the first month of this year, UPI transactions touched the cap of 461 crores. Those crores transactions totalled to be worth about 8.31 Lakh Cr.
The topmost player surprisingly was not Google Pay, In terms of market share PhonePe carried out 21,403 Crore transactions. Those mentioned transactions were worth INR 4.05 Lakh crore in the first month of the year.
The new entrant in the payments market, WhatsApp Pay saw the value and number of transactions grow to great magnitudes. The overall share of the company however is as low as 0.03 percent which entails about 13.4 lakh transactions in the first month. Those transactions were reported to be around 205 Crore in Indian Rupees.
In the month of January, the UPI transactions were recorded to hit the number 461 crore. Those transactions in the month touched the magnitude of 8.3 lakh crore in Indian rupees, equivalent to 111 billion dollars.
This number was not usual in any sense and was the highest recorded number in the history of UPI transactions. Even after this number is the highest in the magnitude of UPI transactions, it grew only about 1 percent month on month. This is in no doubt a jump and halt situation.
Noticing the surge in transactions and magnitude in the UPI sector, it was also noted that app performance had not grown that much. App wise, the growth was not new, it was the previous pace that continued and no jump was noticed in the app sector.
Apps performance recorded a single digit of growth in this month on month. Even in this segment, PhonePe was the winner that carried 4.05 lakh crore transactions. Google Pay, which most people were anticipating, did not come to the first resort. It was the second runner up in the race of UPI transactions. That maintained to get some transaction value that was worth almost three lakh crores.
The third number, in terms of transactions and magnitudes, was won by the Indian player that is also now a publicly listed company. Yes, you guessed it right, it is Paytm. Paytm saw a transactional rate of 85 thousand crores which was a fall from before. Amazon pay got transactions that were worth about 67 hundred crores. WhatsApp, the new entrant in the payments market touched the 205 crores of transactions with its messaging app which is now a UPI payments app too.
Among all these numbers, one thing is common, that thing is UPI. It is the transaction that everyone is looking at and it is also the point of conflict of many multinationals.
UPI war is on with all the players in the market. The goal is to get maximum density in markets and to get a viable customer experience that can increase loyalty. Before we read more about the ongoing UPI war let us read some important words in the UPI market. Basically how the UPI world works.
There are many technical terms that can confuse a noob when we talk about technology. The UPI world is also not an exception. Let us talk about a few things that the UPI entails before we read more about the UPI war.
VPA ID
VPA or virtual payment address is the virtual address of someone. As the name suggests, it is the address to which payment in a transaction can be directed. To begin a transaction, one has to share their virtual address to which the payee can direct the payment.
The payer has to confirm the VPA by entering the MPIN, or mobile pin, to be sure that it is an authentic translation and is done by the owner of the bank account. Once checked, the transaction is completed and a change in balance is reflected, without any delay.
QR code
QR code is a better alternative for VPA IDs, these are codes that can be scanned via a mobile device. Stores have these types of transaction mechanisms that help in the easy collection of payments from buyers.
They can be scanned from the UPI app itself and transactions can happen easily. This is easy and faster than sharing VPA IDs and most smart stores have them as a payment aid.
QR Code Scanner
Several Bank Accounts can be added using the UPI app and Several VPI Ids can be maintained. A maximum of 20 transactions is allowed in 24 hours. All transactions take place on a real-time basis.
The Mobile Number
Most people in India are not tech-savvy and this is a hindrance in payments via UPI. Even if someone sets up a VPA and UPI Id on a shopkeeper’s device, he won’t know it and would not remember it.
UPI apps save the day with one more feature. Mobile numbers can also direct payments to the right address. This feature was enabled recently and has massive use cases.
Every mobile number now is connected to the bank account of the holder and can serve as a UPI or VPA ID. They are known as linked MMID and can direct payments to the right bank account.
Bank Credentials
Another factor in payments of UPI is the bank credentials themselves. You can manually enter the saving account number and/or the IFSC code to the UPI app and the app can direct payments to that specific account. This is however not the best alternative to transactions but is popular in India.
NFC
New smartphones nowadays come with a new technology called NFC. NFC is an audio technology that is contactless and can connect two devices. This connection can also help in UPI transactions and is authenticated by both ends. According to RBI guidelines, one can interlink all their existing KYC compiled e-wallet accounts. But, only a few apps provide this service.
Market Share of UPI Apps and the Ongoing UPI War
A Detailed Look at the UPI App War
The UPI apps we are talking about, have their own territory. Market share refers to that territory in this context.
PhonePe
Last year the UPI app with the most wins was PhonePe. This year the war continues. PhonePe won on all the key metrics that there is to track payments. Be it the value of transactions, registered users and all the merchants’ average.
While PhonePe’s count of transactions remained the same, the volume of transactions rose to 48.7 percent. The startup has been the leader in the market with over 46 percent market share in the transactions volume processed last year. This metric proves the dominance that the UPI startup has gathered.
PhonePe’s share in transactions counts remained the same but the volumes transcended a big jump and it rose to about 48 percent. The company also claimed that the ‘registered users’ have crossed the 350 Million mark. They also mentioned that they were witnessing a 28 percent month on month growth from January to December 2021.
PhonePe is the first payment platform in India. Based out of Bangalore, this UPI payments app became the heartthrob of payers. The company collaborated with Yes bank to get into the UPI space and captured about 37 percent of the new market in India. Later, the company was acquired by e-commerce giant Flipkart. It is soon to be added as a valid payment option in Walmart India’s “B2B Cash & Carry Stores”.
They had the first movers advantage in many aspects. Just like the google pay (Tez earlier) app, the PhonePe app has a lot of features that make them stand out. With the money transfer limit using UPI set to ₹1 lakh, one can pay credit card bills too. An outstanding UI is a cherry on top.
Google Pay
Next in the line of market shareholders is the most household name of Google pay. They didn’t witness significant growth. The market share for google pay dropped from 37.5 per cent to 34.4 percent. According to an NPCI guideline, all third party UPI apps have to add a cap to the value of their transactions at 30 percent by December 2023. This can be good news for this fall in the market share of the US fintech giant.
With great goodwill at the back, Google really stands on a pedestal. The google pay UPI app is by far the most famous UPI payments app in India. Google has always remained a top innovator in every part. Any of the Google services can be relied upon. The name Google itself stands for efficiency and simplicity. The Google Play app has also made it easy for app users to use proximity features. They have NFC enabled in the app.
The payments app from google has all the features that it takes to make it the best UPI app out there. With online trade being a fast option for most people, google play also includes more than 2000 merchants partners in India alone. In India, Google pay is the second-largest UPI payments app with a market share of 35 per cent. It entails figures like 320 Million transactions in terms of volume and 61000 crores in terms of value being the guns on its trajectory.
The app really features loaded and has every feature of a top-notch character. Carrying the ‘Simplicity’ thing that google has managed to carry on all its services and apps, the UPI app has managed to get the second most UPI payments in the country.
PhonePe and Google Pay were the topmost choices of UPI payments in the last year. We will discuss the rest later, let’s focus on the war of these two first.
Paytm
Paytm is another famous name in the UPI segment. It has an inbuilt feature of wallet which can be used without KYC and bank account, this is one of the most unique features that the app has. It is also a differentiator. The war of UPI apps has led Paytm to get a share of almost 6% in the UPI segment. This is rather small but the app has a lot of potentials. The primary rivals are Google Pay and the leader PhonePe.
Paytm was the first digital payment service provider that had its hands on Indian territory. The homegrown brand is the largest digital wallet service provider in the country. The app is known to have dominated the cashless payments market. The company also claims that they have more downloads across Android and IOS than most UPI payments apps. The initial problems that the company faced were the UI and the acceptance of digital payments in India.
After updates and updates with learning’s and learnings, the Paytm app has improved much and now comes with an excellent UI. The app first lost in the war of UI and user experience but the overall performance has been quite impressive. It is the most famous homegrown UPI app in India. Founded by Vijay Shekhar Sharma and being a homegrown company, the startup has a lot of leverage that adds to its revenue.
Paytm is one of the easiest to use UPI apps out there and not only that, the app offers a long list of features. There is a unique wallet feature, then there is a Paytm bank, then a mall on your phone, it is also now entering the investments category.
You can pay your credit card bills, do shopping of all sorts and buy now pay later options are available too. Thus, this small package of apps offers a decent amount of features and accessibility to money and transactions. That is one of the main reasons for its market share of 6%, which is decent in India.
Amazon Pay
The next rival or participant in the UPI war is Amazon Pay. The new entrant in the market with great tech support and seamless payment options, amazon pay is out there to win.
As of November 2020, it was reported that amazon pay was the fourth most used app in the UPI segments. The app wins over everyone in terms that it is a sidekick of payments in shopping. The brand of amazon gives it a good boost. It was reported that Amazon Pay got 37.15 million transactions in volume that added to over 3600 crores in total value. Which is a pretty good sum in the segment.
Not only a shopping aid but the amazon pay app also offers payments of groceries and small buys at a Kirana store. The shopping integration of Amazon is really a great kick start but the app is also growing out of that segment too. Amazon pay got 37.15 million transactions in volume with Rs 3,624.51 Cr in transaction value in this month.
The ongoing war is nothing but a fight of features and like-ability. The app that has the most unique and helpful factor wins the game and takes the customers. All the top players in the market which we discussed above have their own set of features and uniqueness. Here we will try to uncover what lies behind the bush of differentiators.
PhonePe
PhonePe, the most used UPI app in terms of volume, is bound to have awesome features and traits. The startup has made its app look really different and simple. The app is capable of linking various accounts and e-wallets to itself.
You can link free charge, Jio money, and e-wallets like Airtel wallet to your PhonePe account. The app also allows people to pay credit card bills within the app which saves a lot of hassle.
The users of PhonePe can even buy gold with the new update. Cashback and rewards are the most common features of UPI apps in the market. PhonePe has that, without mentioning it. The app follows all the guidelines of UPI payments and thus, one can make a transaction of upto 1 lakh. The app also has the basic categories of regular payments like electricity, gas broadband, data card and the like.
Bill payments and recharges are very easy on PhonePe and there exists a separate icon for money transfer from bank accounts. You can check bank balances too and they are super attentive to negative feedback. Which makes it the all-rounder UPI payments app.
Google Pay
Google Pay is another famous app. The UPI app from Google runs on the same principle as of the parent company Google. The app is simple and works every time without any hassles. However the wallet option is not available, the app does work overtime to make it right for users. You just need a mobile number and a bank account to start your payments. It is easy and reliable.
You can chat with a person on google pay before and after any transactions. The User interface and the experience that it entails is also top-notch. Payment services are available across all the Google services and they can also be used to 3rd party apps. There exist extensions like Zomato, Swiggy, Groww and etc. within the application itself. It is the first to use NFC technology. DTH, broadband, landline, mobile recharges are also reminded to the user. The app is secure and has a safety shield feature too and users can also enable biometrics.
Paytm
The app comes with an excellent user interface now and is completely made in India. Which makes it a famous application among Indians. The app has one of the most differentiating features of a wallet that helps it find a good product-market fit in the UPI segment. Many people who do not operate a bank account can go with this feature of e-Wallet. Paytm Payment Bank is linked with Rupay Virtual Debit Card.
Due to all the features and an excellent UI, the app works in most locations. From a small Kirana store to big malls, Paytm is accepted. You can even invest your money directly from the app itself. Paytm services range from bank to mall to mutual funds etcetera.
Amazon Pay
Amazon Pay is also a famous app because of its parent company, Amazon. The app first originated as a payments app for nearby UPI payments. Now the app has grown into a full-feature app on its own. It is a great aid in shopping for people who love to shop.
Apart from that the app also makes it possible to use it as a UPI payments app. This was the unique feature with Amazon pay but it is not that famous like Google Pay and others.
The reason is that many people don’t know about it, Amazon customers just use Amazon to buy something and forget about their account. Once this barrier is lifted, the Amazon pay app can be a big disrupter in the online payments market.
UPI Guidelines and Regulations
When the online market in the payments sector is booming, it becomes important that the market is regulated. NCPI has come forward to make some guidelines for UPI payments. Here we will discuss some of the most notable ones. These are the guidelines for TPAP, or third party app providers.
NPCI’s guideline had asked all the third-party app providers (TPAP) to cap their transaction value at 30% by December 2023. This means that UPI payment apps like PhonePe and Google Pay now need to rescue their market share. As per NPCI, the upper limit for UPI is Rs. 1.00 lacs.
The Third-party app provider guidelines for TPAP guidelines are also aimed to prevent oligopoly and to promote competition. Competitions will be healthy for the overall market and it has the ability to make the market a little better than before for everyone. These guidelines were also the reason why WhatsApp has a very small UPI share in the whole market. WhatsApps share is equal to 0.08 percent.
Adding to the guidelines above, The NPCI has also disallowed WhatsApp from leveraging its payment platform. They have ordered a cap of 50 crores. This means that Whatsapp payments will not go above the magnitude of 500 million dollars or 50 crores. It is to be noted that WhatsApp had around 487 million registered users in India last year. In 2021, it had 390 million active users growing 16% year on year in India alone.
It was recently seen that the messaging app WhatsApp is entering the payments market which makes people suspicious. WhatsApp was also made to put a cap on their payments feature to prevent monopoly over the market. Their users were limited to 20 million. But now the revised relief says that the company can double down the users of the payment, NCPI said.
Now the cap is reported to be 40 million and WhatsApp has done really well in the past financial year. In January, last month, WhatsApp recorded a total of 23.4 Lakh transactions. That was worth INR 205 Cr. It also entailed a 9% month-on-month growth (highest among the top four, mentioned in the article).
RBI has mentioned that about 50% of the transactions through UPI were below INR 200, thus, a framework to enable small value digital payments in offline mode has been announced. Users will now be able to make small transactions (within 200 rupees) offline (without the use of the internet). We will now be able to channel transactions without any instruments such as cards, wallets and mobile devices in any UPI app.
100% of post office banks will come under the core banking umbrella to boost financial inclusion. The move is aimed at giving access to post office bank accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts, During the Budget 2022 speech, Finance minister Nirmala Sitharaman said.
To boost the adoption of digital banking services further and to mark 75 years of India’s independence, 75 digital banking units in districts will be set up by scheduled commercial banks, Finance minister Nirmala Sitharaman said.
“This will be helpful, especially for farmers and senior citizens in rural areas, enabling interoperability and financial inclusion,” she mentioned in her Budget speech.
All the guidelines point in one direction, and that direction is the direction of a cashless future. We are all moving to a cashless world where paper money will be a thing of the past. This was not easy before but looking at the current trends and shifts in technology, it is the near future. Exciting as it gets, the UPI market in India is set for more tides and currents.
As per a report by ACI Worldwide, India retained the top spot in terms of digital transactions worldwide. India saw payments of 25.5 billion on a real-time basis. It is the highest number, followed by China.
No doubt, that the UPI market is set for growth in India and anyone capitalising on this will make real cash. This is the reason UPI payments companies are fighting for this and thus the UPI war.
Apps like PhonePe, Google Pay, Paytm and amazon pay have been fighting for market dominance and the market is evenly distributed in most parts of India. Besides growing in India, the Unified payments interface is all ready to enter overseas as well, reports say. UPI will be prevalent in countries such as the USA, the UK, Japan, China, Singapore, etc.
FAQ
Which are some of the Indian UPI apps?
Phonepe, Paytm, and BHIM are some of the UPI apps based in India.
Are UPI apps safe?
Yes, UPI apps are completely safe as it is regulated by the Reserve Bank of India & NPCI.
Which payment app is the best?
Google Pay, Paytm, Phonepe and Apple Pay are some of the best payment apps.
The term “FinTech” is the combination of finance and technology and is referred to the provision of new solutions in the field of finance by IT venture companies. New business models are being created one after another, particularly in the area of B to C services using the Internet. The major difference between these new businesses and traditional finance companies is their thought regarding IT investment.
The use of information technology is generating dramatic changes in financial services making it more easier and efficient to use. Payment services were previously having the players like banks and credit card companies, but now variety of new players have entered the field making it more easier and beneficial for the people of the country. Correspondingly, UPI payments impacted FinTech Industry.
One of the reasons why UPI services has been adopted globally with trust. When you use UPI to pay for things, card information is not shared with merchants, meaning that even if the merchants are hacked, people using UPI payments are safe from leaking information.
Another reason why UPI payments is revolutionizing the Fintech Industry is its hassle free approach to pay and register. All that is required to validate your UPI is simply an authentication of your Aadhar card, your finger prints are scanned and your mobile phone number is verified.
The Indian society have a strong fear of fraud, both in physical retail and online. Although governmental interventions to use digital transfer modes for payments had taken place in India, it is still a very cash-based society. If we take a look at credit card usage, which is a basic form of digital payments, adoption of such payment services are low in the states of India as compared to the US, UK, Japan or South Korea. Building trust in digital payments services is the key.
The take-up of digital payments or any other FinTech services will be about how the FinTech industry can provide customers with comfort and trust, enabling them to feel safe and secure using the service. The use of mobile is already driving the biggest change in financial services history. Mobile is considered as the fastest mass adoption of a technology in history than any other technology. There are already 7.2 billion mobile devices today. With UPI payment services, mobile was only 1% of all transactions in 2010, it is now above 45% in 2019.
CEO of National Institution for Transforming India (NITI), Amitabh Kant in an interview had said that Fintech market in India is likely to expand to $31 billion in 2020 and this owes largely to the use of UPI payments. This is mostly because India is the only country in the world with over a billion mobile connections and bio-metrics, provides an enough scope and opportunity for penetration of fintech technology.
Indian FinTech market is estimated to jump to $140 billion in 2023 and by 2025, Fintech industry valuation is estimated at $150-160 billion.
UPI has made payments easier: Gone are the days, when people used to carry huge bundle of cashes as they traveled or visited a restaurant. With the introduction of UPI payments, it is now become an easier and more secure while travelling.
UPI has made the buying and selling easier through e-commerce: UPI has made the buying and selling through fintech app solution, easier for the e-commerce companies. When a diverse range of devices are connected via the Internet of Things (IoT), it possible to obtain historical data concerning peoples’ daily activities. Using these life-logs, the e-commerce platforms are able to analyse patterns of regular and illicit activity, increasing their ability to detect illicit activity.
Enhancing trust for both customers and businesses: UPI payments has initiated and created a trust between the buyers and sellers. This is due to the privacy that is maintained within the system. UPI transactions are always payer initiated and demands the approval of the payer by an OTP. This is focused on person-to-person (P2P) transfers.
Payments via UPI are extremely quick: Another noteworthy feature of the UPI that has created a huge demand for it in the Fintech industry is that the payments or transactions are done extremely swift. There is no lag and delay which helps in the smooth flow of business.
With UPI you can directly link your account to the BANK and there is no need for virtual wallets: There are many virtual wallet companies like Paypal, PayTM, Mobikwik etc, which requires you to put some money within the virtual wallet, but with the use of UPI payment you can directly use the money from your savings account.
You may also keep a record of your bank transactions through UPI: UPI also enables you to keep a record of the withdrawals and deposits, this saves time for people who would have otherwise visited the bank to update their passbooks. This creates a major benefit for the elderly people who do not need to visit banks and they can transfer whatever amounts they want through an application.
UPI in the last two years has made another innovation where you can request credit through your overdraft (OD) account. This latest value addition eliminates the risk of fraud credit card calls and the risk assessment involved through traditional credit facilities from banks. Thus we can rightly say that a culture of innovation and entrepreneurship has emerged with the use of UPI in the Fintech Industry and we could not have been more proud. It Revolutionised the idea of daily payments and also improvised on the security of transfers.
FAQs
What is UPI full form?
UPI’s full form is Unified Payments Interface.
What is UPI in banking?
Unified Payments Interface (UPI) is an instant payment system developed by the National Payments Corporation of India (NPCI).
What is a FinTech industry?
FinTech stands for Financial technology. FinTech is an economic industry that includes companies that use technology to make financial services quick and efficient.
What is UPI Technology?
UPI is a unified interface of NPCI that merges various banking services and wallets payment and other features under one payment system. One UPI ID and a pin are generated. A UPI ID and Pin are used to send and receive money and real-time bank-to-bank payments can be made.
The PayU Insights report had stated that during 2020 because of the coronavirus pandemic and the mass restrictions laid down by the countries, the digital platforms and the digital apps had seen a huge surge in their user base which is over more than 100%. Let’s look at how the digital platforms have doubled their growth in 2020.
The PayU Insights report said that due to the Covid 19 pandemic and because of the various suggestions by experts to avoid paying physical cash as a precaution to not get in touch with the virus, the UPI payment has seen an increase in their demand.
This is because of certain places like shopping malls, supermarkets and stores implementing digital payments as the primary source of payment based on the guidelines given by the governments and considering it to be safe for the customers.
The UPI transactions have seen a growth of around 288 % in the year 2020 and the expenditures through UPI have grown up to 331 % between the years 2019 and 2020.
OTT
The OTT segment has also seen a huge rise in their demand. Due to the pandemic, people were restricted to stay in their homes and most of them would resort to a piece of entertainment. The coronavirus pandemic had led to the shutting down of offline theatres and other sources of offline entertainment avenues.
Since the OTT platforms are available for a reasonable rate and additionally serving their purpose to keep them entertained. Moreover, all the new movies which were supposed to be released in the theatres were released on the OTT platforms.
The OTT platforms have released a wide range of movies in the Indian Languages rather than concentrating on the western languages. This would be one of the major reasons for the increase in demand for the OTT platforms.
In 2020, there were a lot of local OTT platforms which came into existence and a lot of OTT series and super hit movies. Some of the OTT platforms include Zee5, Sony Liv, Voot and many more.
The OTT segment had witnessed an incredible growth in their transactions of around an increase of 144 % in the year 2020 and also an increase in their expenditure of up to 139 % in between the years 2019 and 2020.
Even the gaming sector has seen an increase in their demand. Again, the gaming sector is also considered to be part of the entertainment industry and it plays a major role in entertaining the millennials and the children.
The new and updated games, better laptops and computers with greater graphics and higher software upgrades would let the users try different games to keep them entertained. There are multiplayer games where the players can converse with each other and letting them play as a team.
These games provide a feeling of playing the games together with their friends even though it is in a virtual model. The gaming sector is the secondary source of entertainment and is also considered to be the primary source by certain people.
The gaming sector has witnessed a phenomenal increase in expenditure of up to 100 % in the year 2020 and also an increase in their average ticket size of up to 154 % in between the years 2019 and 2020.
e- commerce segments
The e-commerce segments have also seen an increase in their demand. The e-commerce sector was one of the booming industries in the country but still had to face a lot of challenges to gain the trust of Indians.
But due to the restrictions laid down because of the coronavirus pandemic and the safety concerns in going to a retail outlet the e-commerce industry has seen an increase in their demand. Another factor would be the wide range of advertisements and promotions done by the e-commerce giants such as Flipkart and Amazon on the safety precautions they undertake for the safety of their customers.
All these factors have led to a massive increase in the number of transactions for the e-commerce segments of up to 106 % in the year 2020 and an increase in expenditure of around 124 %, that is in between the first six months and the last six months of 2020.
Even the Ed-tech had seen a considerable rise in their demand. As the colleges and classes for students had been shifted to the online mode and certain colleges making it important to have an online course to be taken up by students have increased the demand for the Ed-tech platforms.
A lot of colleges have also taken up subscriptions to certain Ed-tech platforms to provide a platform for the students who would want to upskill themselves. Even the professionals have used these platforms to upskill themselves and to work on their growth.
Indian EdTech Sector Funding in last Five years
In the year 2020, the number of transactions in the ed-tech sector had seen an increase of up to 78 % and expenditures of the Ed-tech industry have seen an increase of up to 44 %. The Ed-tech industry has seen a sharp rise in their demand as soon as the implementation of lockdown with an increase in their transactions of up to 69 %.
The gaming industry is expected to have a statistical worth of about $300 billion by 2025.
What is the future of OTT?
According to KPMG Media and Entertainment Reports, the Indian OTT market is expected to grow 45 per cent to reach USD 5 billion by the end of fiscal 2023.
How big is the EdTech market?
The global education technology (EdTech) market size was valued at USD 76.4 billion in 2019 and is expected to reach USD 89.1 billion in 2020.
Conclusion
In India, the major growth in the digital platforms was seen in the North-Eastern part of the Country. The countries such as Nagaland with 93 % increase, Manipur with 74 % increase, Tripura with 63 % increase, Arunachal Pradesh with 66 % increase and Meghalaya with an increase of 82%. These countries have been on top of the list.
Due to the lockdown imposed to contain the spread of COVID-19, UPI has recorded transactions of less than one billion for the month of April after 12 months of constant growth. This is the first time in the past seven months that UPI volume went below the one billion mark. According to the National Payments Corporation of India (NPCI), UPI has registered 0.99 billion transactions amounting to Rs 1,51,140 crore(Rs 1.51 trillion).
Unified Payments Interface (UPI) is an instant payment system developed by the National Payments Corporation of India (NPCI), an RBI regulated entity. UPI can be used through various apps like Google Pay and PhonePe to make direct payments from one bank account to another.
The lockdown imposed by government due to COVID-19 has caused everything to shut down or just semi-operational. The coronavirus outbreak has devasted many sectors of human life, let it be financial sector, industrial sector, etc. resulting into economic crisis. Yet, India’s success with unified payments interface (UPI) has continued to bring essential services to consumers amid the lockdown as well.
Though the government was able to transfer the relief money through UPI in the bank accounts of crores of Indians, UPI witnessed 20.8% drop in volume and a 26.7% fall in value as compared to the previous month. As corona effect, UPI had registered a little drop in payments volume in March resulting from 1.25 billion transactions worth Rs 2,06,462 crore or Rs 2.06 trillion.
Moreover, along with UPI, NPCI’s real-time payments service IMPS has also registered a sharp fall in volume as well as the value of transactions. In April, IMPS processed 122.47 million payments worth Rs 1,21,140.79 crore which is almost half of the previous month. In the previous month i.e. March, the figure was 216.82 million transactions worth Rs 2,01,961.70 crore.
The decline is shocking as in February 2020, the RBI governor, Shaktikanta Das, had highlighted that digital payments accounted for almost 97% of the daily payment system transactions in terms of volume. He also mentioned that digital payments had accelerated by 50% in terms of volume in the last five years.
However, UPI body NPCI’s CEO Dilip Asbe said, “ For the last five years, the number of transactions of UPI has been growing continuously month-on-month. But now there has been a slight drop in the volume due to the lockdown. The drop in volumes is due to near-zero restricted spends such as on e-commerce, travel, and similar online platforms. We expect volumes to pick up soon.”
Reasons behind the Drop in Transactions
It was anticipated that a nationwide lockdown to curb the spread of the Covid-19 pandemic would affect the digital payment volumes. However, financial experts were assured that digital payments will not get affected adversely but rather continue to grow as people would rely on digital transactions to avoid physical contact.
During the initial days of the lockdown, e-commerce, foodtech, grocery as well as other online platforms were unable to operate. This led to gradual fall in transactions but later the government had allowed essential services to continue. Moreover, payments to PM-CARES via UPI have been the driving force behind UPI’s growth which is still 20.8% drop and these numbers are only in a few million.
Yet, transactions did not comeback to the normal as government only allowed transactions on essentials. Hence, a majority of e-commerce services are still waiting for government orders. Soon, the government is likely to relax the norms for e-commerce platforms and allow them to deliver non-essential goods as well.
According to payment gateway Razorpay’s digital transaction report, for the month of April the transactions in the logistics have dropped by 96%, the travel sector has declined by 87%, food, and beverage by 68% and groceries by 54%. In the last 30 days, transactions in cities like Ahmedabad, Mumbai and Chennai took a hit of 43%, 32% and 25% respectively. The report recorded transactions between, when the lockdown was announced.
Razorpay’s report also stated that UPI emerged as the most popular digital payment method from March 24 to April 23, with 43% of the total transactions during the period. It was followed by card payments with 39% and net banking with 10%. However, compared to previous month, transactions through UPI declined by 37%, cards by 30% and net banking by 28%.
Government has asked people to prefer Contactless Payment
Travel Restrictions affected the Digital Payments
The fall in UPI and digital payments is not only because of global and national lockdowns and restrictions on non-essential segments but due to restrictions on tour, travel as well. During the lockdown, people are not allowed to travel by train or aeroplane. This resulted into massive fall in transactions as people cannot book tickets of train or plane.
The report revealed that the metro cities were affected the most and the impact was still limited in other cities and towns. This difference in impact is more significant in metro cities because the number of people travelling by air, especially for work, is also higher in the metros. The report added that leading firms are also processing fewer online and offline digital transactions with air travel, hospitality, and retail being the three most-impacted sectors.
As of now, NPCI seems prepared to handle the lockdown. CEO Dilip Asbe said that NPCI can multiple sessions and has a spare capacity to handle the demand. In order to ensure that everything keeps running smoothly, around 5% of the NPCI’s workforce is still going to office.
NPCI has already devised a plan for the situation with due consideration of all the factors. Asbe said that NPCI has received complaints from some businesses about delays in cheque clearing. He added that there could be issues on the last mile. While we are in touch with banks, there might be some issues with uploading because of the lockdown.
These issues are might be hard to resolve now as most of the workforce isn’t available now. However, Asbe said that the main objective here is to keep employees safe. If they are safe, the operations can be managed. There are things we cannot disclose, but there is enough backup in case something goes wrong.
Government is also using UPI technology for facilitating the transfer of money in the bank accounts of beneficiaries within a day under Pradhan Mantri Garib Kalyan Yojana (PMGKY). He noted that besides this transfer of relief funds, the government has been using UPI for transferring monetary perks in various schemes such as Ujwala and MNREGA.
After the success of the implementation of UPI in these schemes, many state governments are now relying on UPI technology to transfer funds under various schemes. Madhya Pradesh government which recently transferred some relief money in the accounts of lakhs of construction workers. PM Narendra Modi has urged people to go for digital payment to ensure safety from the infection.
Meanwhile, several big names in the Indian startup ecosystem have come forward to appeal. Amitabh Kant, CEO of Niti Aayog and Rajan Anandan, managing director of Sequoia Capital India, have been encouraging people to make online payments. Both Kant and Anandan through social media have emphasised that digital payments are the safest way to make payments to ensure minimum exposure to coronavirus.
The National Payments Corporation of India (NPCI) is an umbrella organization for operating retail payments and settlements systems in India. It is an initiative by the Reserve Bank of India (RBI) and the Indian Bank Association (IBA) under the provisions of the Payment and Settlement Act, 2007, for creating a robust infrastructure in India for any kind of retail payments and settlements. Created with an intention to provide a fair infrastructure to the entire Indian Banking system, it is Not-for-Profit in nature and has made it possible to create payments both physically as well as electronically.
National Payments Corporation of India
Management Team
Under the non-Executive Chairmanship of Mr. Biswamohan Mahapatra, a veteran who has served 33 years at RBI, the organization is owned by a consortium of major banks. The Board of Directors consists of nominees from the Reserve Bank of India and from nine core promoter banks.
There are nine main promoter banks in India which are:
The corporation portfolio currently includes various services such as:
Unified Payments Interface (UPI)
Unified Payments Interface
Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing, and merchant payments under a single hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
With the above context in mind, NPCI conducted a pilot launch with 21 member banks on 11th April 2016 by Dr. Raghuram G Rajan (ex-Governor of RBI) at Mumbai. Banks have now uploaded their UPI enabled Apps on Google Play store.
The Participants of the service include the payer, payee, remitter bank, beneficiary bank, NPCI, bank account holders, and merchants. Some examples of UPI apps that you may already be using are PayTm, BHIM, PhonePe, Axis Pay, and many more.
RuPay
RuPay
RuPay, which literally translates to Rupee and Payment merged together, is a domestic card scheme launched by NPCI in 2012 to fulfill the Reserve Bank Of India’s desire to have a domestic, open loop, and multilateral system of payments in India . In India, 90% of credit card transactions and almost all debit card transactions are domestic; however, the cost of transactions remained high due to the monopoly of foreign gateways like Visa and Mastercard.
RuPay facilitates electronic payment at all Indian banks and financial institutions. NPCI maintains ties with Discover Financial to enable the card scheme to gain international acceptance.
Lower costs and affordability, customized product offering for Indian customers, interoperability between payment channels and products, and protection of information related to Indian consumers are just some of the advantages of RuPay as claimed by NPCI.
RuPay Contactless
It is a contact-less technology feature that allows cardholders to wave their card in front of contact-less payment terminals without the need to physically swipe or insert the card into a point-of-sale device. This is an EMV-compatible, “contactless” payment feature similar to Mastercard Contactless, Visa Contactless and the ExpressPay, using RFID technology. All three use the same symbol. Contactless can currently be used on transactions up to ₹2000.
RuPay Contactless
NPCI developed RuPay Contactless’s specifications are open standards, interoperable, scalable, and can be adopted by all card schemes. RuPay Contactless (Transit as well as Retail) offers the unique proposition of one card for all payments. This card can be used for transit payments (bus, metro,cab etc.), toll, parking, small value offline retail payments, as well as normal day to day retail payments.
One Card Many Benefits
Bharat Interface for Money (BHIM)
Bharat Interface for Money
Bharat Interface for Money (BHIM) is a mobile application that lets you make quick payment transactions using Unified Payment Interface (UPI). You can make instant bank-to-bank payments and Pay and collect money using your mobile number or Virtual Payment Address (UPI ID). More than 125 lakhs citizens have been using the BHIM app since 2017.
Unlike mobile wallets (PayTM, MobiKwik, mPesa, Airtel Money, etc) which hold money, the BHIM app is only a mechanism which transfers money between different bank accounts. Transactions on BHIM are instantaneous and can be done 24/7 including weekends and bank holidays.
Users can create their own QR code for a fixed amount of money, which is helpful in merchant-seller-buyer transactions. Users can also have more than one payment address. If the 12-digit Aadhaar number is listed as a payment ID, the BHIM app will not require any biometric authentication or prior registration with the bank or Unified Payment Interface (UPI).
At present, there is no charge for transactions from ₹1 to ₹1 lakh. The minimum transaction amount should not be less than ₹1. A maximum of 20 transactions are allowed in a day. Some bank might however levy a nominal charge as UPI or IMPS transfer fee. Currently the fund transfer limit has been set to a maximum of ₹20,000 per transaction, and a maximum of ₹40,000 per day.
The BHIM app currently supports 13 languages (including English), though there are 22 official languages of India (excluding English) under 8th Schedule of Constitution of India. In near future, BHIM App is expected to support all 22 official languages of India along with other regional languages which are spoken widely next to the scheduled languages.
Immediate Payment Service (IMPS) is an instant payment inter-bank electronic funds transfer system in India. IMPS offers an inter-bank electronic fund transfer service through mobile phones. Unlike NEFT and RTGS, the service is available 24/7 throughout the year including bank holidays.
In 2010, the NPCI initially carried out a pilot for the mobile payment system with 4 member banks (State Bank of India, Bank of India, Union Bank of India and ICICI Bank), and expanded it to include Yes Bank, Axis Bank, and HDFC Bank later that year. IMPS was publicly launched on November 22, 2010. Currently, 53 commercial banks, 101 Rural/District/Urban and cooperative banks, and 24 PPIi have signed up for the IMPS service.
The participants of IMPS include the remitter (sender), beneficiary (receiver), banks, and National Financial Switch – NPCI.
You can avail the fund transfer service:
Using Mobile number & MMID (P2P).
Using Account number & IFS Code (P2A).
Using Aadhaar number (IMPS).
National Electronic Toll Collection (NETC)
National Electronic Toll Collection
The National Payments Corporation of India (NPCI) has developed the National Electronic Toll Collection (NETC) program to meet the electronic tolling requirements of the Indian market. It offers an interoperable nationwide toll payment solution including clearing house services for settlement and dispute management.
Interoperability, as it applies to National Electronic Toll Collection (NETC) system, encompasses a common set of processes, business rules, and technical specifications which enable a customer to use FASTag as a payment mode on any of the toll plazas irrespective of who has acquired the toll plaza.
FASTag is a device that employs Radio Frequency Identification (RFID) technology for making toll payments directly while the vehicle is in motion. FASTag (RFID Tag) is affixed on the windscreen of the vehicle and enables a customer to make toll payments directly from the account which is linked to FASTag.
FASTag offers the convenience of cashless payment along with benefits like savings on fuel and time as the customer does not have to stop at the toll plaza. The program is currently live on 415+ toll plazas across the country. As per NHAI, FASTag has unlimited validity. 7.5% cashback offers were also provided to promote the use of FASTag. Dedicated Lanes at some toll plazas have been built for FASTag.
*99#
*99#
*99# service has been launched to take the banking services to every common man across the country. Banking customers can avail this service by dialing *99#, a “Common number across all Telecom Service Providers (TSPs)” on their mobile phones and transact through an interactive menu displayed on the mobile screen. Key services offered under *99# service include sending and receiving inter-bank account to account funds, balance enquiry, and setting/changing UPI PIN besides other services.
*99# service is currently offered by 41 leading banks and all GSM service providers. It can be accessed in 13 different languages including Hindi and English. *99# is a unique interoperable direct to consumer service that brings together diverse ecosystem partners such as Banks and TSPs (Telecom Service Providers).
It is a common technology platform developed by NPCI which allows banks and TSPs to seamlessly integrate with each other and provide banking services to customers at large over mobile phones (basic as well as smartphone).
Features of *99# service include:
Use of USSD as the access channel that works across all GSM handsets (smartphone or otherwise), making it reach the last mile user.
Supports menu-based applications that are easy to maneuver for the users.
Does not require data connectivity (works on signaling channel) and this makes it a high availability service.
Round the clock availability (works even on holidays).
Accessible through a common code (*99#) across all GSM operators and mobile handsets.
Additional channel for using BHIM app and a key catalyst for financial inclusion.
The Bharat bill payment system is a Reserve Bank of India (RBI) conceptualised system driven by the National Payments Corporation of India (NPCI). It is a one-stop ecosystem for payment of all kinds of bills, thus providing an interoperable and accessible “Anytime Anywhere” bill payment service to Indian customers with certainty, reliability and safety of transactions.
Bharat Bill Pay has multiple modes of payment and provides instant confirmation of payment via an SMS or receipt. It offers myriad bill collection categories like electricity, telecom, DTH, gas, water bills etc. through a single window. In future, biller categories may be expanded to include insurance premium, mutual funds, school fees, institution fees, credit cards, local taxes, invoice payments, etc. An effective mechanism for handling consumer complaints has also been put in place to support consumers regarding any bill related problems in Bharat Bill Pay.
BHIM Aadhaar
BHIM Aadhaar
BHIM Aadhaar pay is an Aadhaar based payments interface which allows real time payments to merchants using the customer’s Aadhaar number and authenticating him or her through biometrics. BHIM Aadhaar Pay Merchant Incentive Scheme was effective from 1st April, 2017. The end date of BHIM Aadhaar Pay Merchant Incentive Scheme was 31st March, 2019.
Merchants can initiate transactions where customers pay money using their Aadhaar number and authenticate the transaction using their biometrics for the goods and services purchased. To be able to effect the same, the merchant should have an Android mobile with the BHIM Aadhaar app installed and a certified biometric scanner attached with the mobile phone/kiosk/tablet through a USB Port or with Micro-ATM/POS, mPOS. The customer and merchant should have their Aadhaar number linked to their bank accounts.
Merchant can view the transaction for its status, whether it was a successful transaction, pending transaction, or a failed transaction. Customers can pay using their Aadhaar number and biometrics at merchant locations where BHIM Aadhaar Pay is accepted.
The merchant enters the customer details and amount in his or her BHIM Aadhaar Pay App and the customer provides his biometrics on the Merchant App after selecting the bank.
Limit on Value of Transaction: The per transaction limit is Rs. 10,000 (as the maximum incentive is capped at Rs. 50 at 0.5% of the transaction value) The maximum incentive which can be earned by the merchant in a month is Rs.2000. The BHIM Aadhaar Pay enabled merchant will receive the incentive between one to seven days after the date of transactions (the merchant should check with their banks for further details).
Coronavirus is here, and it’s making a big impact on every aspect of business. From trade market swings to airline collapses, the economy of many industries is taking its toll and having major constraints. Whole worldwide especially in Europe, those living in Italy, Spain, Germany and France have been the most impacted so far and the situation is set to worsen. The indirect effects for startups have also been huge, but some businesses are faring better than others. While many struggle to operate amid travel turmoil, others are cashing in on the health crisis by supplying much-needed medical solutions. Some London founders even launched an entirely new startup (called Epiderm) this year to help track employee and visitor contact through check-ins and calendar analysis. Similarly, there are clearly dozens of sectors that will likely be impacted such as dating apps, concert booking apps, edtech, will-writing startups, fitness apps, remote working tools and recruiting startups and so on.Here we discussed about impact of Coronavirus on Fintech Startups.
What about the sector of fintech?
Like everything else, it’s also likely to be under threat. There’s more to come from COVID-19 in the coming weeks where large and small fintech companies take a hit. Some could even benefit. Fintech firms globally also have already benefited from more flexible regulations in both emerging and mature countries as many efforts are being made to improve financial inclusion and serve a broader digital economy. According to a report from Ecosystem, there were five key trends that were expected to shape the Fintech market during 2020. The coronavirus pandemic could be devastating for many companies, but it’s also shining a spotlight on the power of fintechs across the world. They seem to be responding to the sudden challenge effectively, though uncertainties lie ahead.
Negative Impacts of Consumer Spending
Fear, panic, and quarantine measure heavily impact consumer spending. Canceled flights, closed stores, and social distancing have resulted into a drop in transaction volume at all levels of the economy. This means FinTech firms in the payments sector like Paypal, PhonePe, Google Pay, Stripe, or Chime will collect fewer fees, negatively impacting their profitability and valuations. Hardware shortages could also impact firms like Square, that rely on digital devices to support transaction processing. It’s evident that large businesses are already feeling the heat with the coronavirus outbreak. Companies such as Mastercard and Visa have cut their predictions for revenue due to the scare. This is because many users of credit cards are unlikely to use it to purchase flights, which is one of the more common transactions for credit card use.
The impact of the coronavirus outbreak is impacting both financial markets and consumer behavior as never before. At least in the short term, there has been a significant flight to safer investments by consumers, which could negatively impact venture capital funding of existing and new fintech firms. Combined with investors concerned with higher funding costs, the volatile market could be a catalyst for lower valuations. This potential drying up of financing to non-traditional financial services firms could force many firms to find collaboration or investment partners from traditional banking organizations. Some early-stage fintech firms may need to shut down.
Chinese fintechs will likely face the worst negative impact from the virus. Funding for Chinese fintechs was already down in 2019, likely due in part to trade tensions between the US and China. In 2019, fintechs only secured $298 million, down from $1.8 billion during the same time the year before. Having originated in Wuhan, China, the coronavirus is making the country’s economic outlook particularly uncertain, and more investors may shy away from the market as a result. That means Chinese fintechs might need to prepare for an even less funding-friendly environment in 2020 and shift their focus to a sustainable business model.
Positive Impacts
Whilst we’ve seen many negative impacts recorded in the fintech sector, there is a bright side in which some companies benefiting from. It’s encouraged many companies to adopt fintech for the purpose of their business. For example, the Banking and Insurance Regulatory Commissions company Ye Yanfei explained that blockchain is being utilised for medical data verification. Similarly, consumers desire for digital banking services will most likely increase, forcing many traditional financial institutions to fast-track digital innovation efforts. As a result, many legacy banks and credit unions may look to fintech firms or startups for assistance in bringing better digital banking solutions to the marketplace during this crisis. This increase in demand for digital solutions could provide a lifeline to fintech firms at a time when VC funding may not be an option.
In addition, weakening economies may force government organizations and regulators to stimulate the expansion of fintech solutions. For instance, South Korea is planning to temporarily ease regulations on fintech and ten other industries in March, in an attempt to jumpstart its economy amid the coronavirus outbreak. The World Health Organization has also encouraged contactless payments to contain the spread of COVID-19. Moreover, Google Trends shows a significant spike in the search requests regarding online loans which is a good news for many fintech firms.
Governments are appealing for Cashless Payment
Many countries are also encouraging the use of contactless payment to prevent the spreading of the virus any further from the exchanging of money. To ensure safety of citizens amid the coronavirus outbreak, the Reserve Bank of India (RBI) governor, Shaktikanta Das, asked customers to use digital banking facilities as far as possible. Das added, “In the context of COVID 19, RBI and the government together are giving emphasis on encouraging digital payments. And over a period of time, various measures have already been taken to establish safe, secure, stable and affordable retail payment system such as the National Electronic Fund Transfer (NEFT) and the Immediate Payment Service (IMPS).” In South Korea, where regulations were once considered rather strict in the fintech domain, they’re now willing to ease the regulations that they have. This is to lessen the impact of the virus spreading and having a larger impact on the economy.
Reserve Bank of India(RBI) has appealed people to use Contactless Payment
It could boost demand for certain insurance types. The virus’ dominance in headlines may increase awareness of insurance and boost demand for health and life coverage, as well as business interruption and event cancellation coverage. For instance, the outbreak has led to many conferences and events being cancelled at the last minute. At the same time, insurers are not supposed to pay over claims of this outbreak. Most travel insurers, for example, exclude pandemic, epidemic disease or infectious diseases from their coverages, meaning that likely only few will be affected by the virus. A report has revealed India has shown a moderate increase of 7 % when it comes to availing online financial services during this period of social distancing.
21-day Lockdown to promote Digital Payment
India is currently going through a 21-day lockdown that was imposed by Narendra Modi-led central government, as part of its plan to battle the novel coronavirus COVID-19. Several prominent names in the Indian startup ecosystem have also been promoting digital payments. There are various digital payment channels people can use instead of transacting via cash. Digital payments channels include NEFT, IMPS, UPI, etc. Razorpay’s report highlighted that UPI, internet banking and wallet payments have all grown in India because of quarantine and social distancing. Surprisingly, Delhi and Bengaluru have noted a decline in digital payment but this is just a matter of time. Soon, digital payment will see a boom across all cities due to lockdown. So, this is a good opportunity for all fintech firms and startups to flourish.
Shalini Rath
