Mumbai: National Payments Corp. of India Ltd’s unified payments interface (UPI) project, which will allow customers to transfer money and make payments almost as easily as they send a text message, will go live in April.
NPCI, which operates the Rupay payments network that competes with Mastercard and Visa in India, is testing the interface in association with Axis Bank Ltd, A.P. Hota, managing director and chief executive officer of NPCI, said in an interview on Tuesday.
Twenty-nine other banks have also agreed to start UPI-based services to their customers starting the first quarter of the next financial year, he added.
UPI will allow a customer to instantaneously transfer funds across different banks with the use of a single identifier. Multiple bank accounts can be linked to a single mobile banking application and money can be both received and requested through the same interface. The product will eliminate the need to exchange sensitive information such as bank account numbers, one-time passwords or phone numbers during a financial transaction.
“If you go to a shop or use a taxi service, the shopkeeper or the taxi driver can collect money through UPI. All you have to do is give your virtual address instead of bank account number or mobile number,” said Hota.
The customer will have to key in their password on their phone, thereby approving the said transaction, which will happen instantaneously, Hota added.
Nandan Nilekani, co-founder of Infosys Ltd and former chairman of Unique Identification Authority of India, has been advising NPCI for its UPI service. Nilekani did not immediately respond to an email seeking comments on Wednesday.
The introduction of UPI can have a significant impact on the retail payments space, particularly given the rapid growth in mobile payments in India over the past few years. Banks reported 32.48 million mobile transactions in October, where funds worth Rs.30,568 crore were transferred, according to data available with the Reserve Bank of India (RBI). This compares with 14.7 million transactions worth over Rs.8,400 crore a year ago.
Making transactions through the mobile easier and more secure will reduce the high reliance on cash in the economy. Sixty-five per cent of all consumer transactions in terms of value are still carried out in cash, according to a 17 December report by JM Financial Institutional Securities.
“UPI will bring in a big change in the payments space. The impact of it is that it will allow any bank to on-load customers across board. For instance, you will be able to use our bank product seamlessly even if you are not our customer. It will be a level-playing field for all banks,” said K.A. Babu, head of retail business at Federal Bank Ltd.
UPI could also potentially challenge the business model of mobile wallet providers who have flourished because of the convenience they offer to customers when compared with mobile banking services. If UPI is widely accepted across the banking sector, the need for wallets could reduce.
“UPI will allow access to a bank account through a single interface. This means the payments space will see reduction in the number of transaction failure. In case of wallets, it will get much simpler to load money. You will no more need net banking or credit card details to load money because one virtual address will do the job for you,” said Amrish Rau, managing director, Citrus Payment Solutions Pvt. Ltd.
“The downside of this is those wallets which function only to solve the problem of second factor authentication will struggle to grow as transactions in bank accounts becomes seamless,” Rau added.
A move towards UPI and other modes of electronic payments will also allow for better cost management by banks with ample cross-selling opportunities, said the JM Financial report cited above.
It would also lead to higher competition among banks and give financial inclusion activities a fillip, it added.
As part of its strategy to expand its product portfolio, NPCI is also launching four other products in the financial year starting 1 April. The products include Bharat Bill Payment System (BBPS), electronic toll collections, Rupay credit-plus-debit card and a tap-and-go transit card.
The new products will help NPCI increase monthly transactions to 1 billion from its current 570 million.
NPCI plans to test the BBPS service in June and the scheme will be rolled out across India by December, Hota said. BBPS will be a centralized bill payment system that will allow customers to use a single website or outlet to pay all cyclical bills such as for electricity, cable and mobile phone.
“Right now we have 4-5 banks with us. We are in the process of identifying billers from categories such as electricity and telecom service provider. Right now, solution development work is on,” said Hota.
BBPS is an RBI-mandated scheme where NPCI was appointed as the central unit and the operator, he added.
NPCI is also set to conduct testing for a tap-and-go mass transit card in March through a Bangalore bus service. Axis Bank has agreed to become the first banker to issue these cards and over a period of time other banks are likely to join, Hota said.
“Once the pilot is successful in Bangalore, the ministry of urban development has indicated that they will adopt it and name it National Common Mobility Card. It will be adopted as the standard for 100 smart cities and will be seamlessly usable across the country,” he said.
NPCI is also planning to launch a product for electronic toll collections, where a tag can be placed on a vehicle and it can automatically approve payments at any toll station without having the need to stop and pay in cash. Such a product was launched by ICICI Bank Ltd in association with National Highways Authority of India in 2014 on the route between Mumbai and Delhi. NPCI plans a nationwide rollout.
The fourth product in the pipeline for NPCI is a Rupay credit card.
“The procedural timeline for credit card is getting framed and banks are being consulted. This will be an entry for Rupay to be fully functional card and not for just debit. We want to go operational in June-July,” Hota said.
NPCI is exploring the possibility of a credit-cum-debit card as well. Though this is still in the discussion phase, as banks will have to make changes at their payment terminals to facilitate such transactions, Hota said.
NPCI, which was incorporated in December 2008, has 10 promoter banks.
They are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank Ltd, Citibank and HSBC.