‘Payments bank exits has nothing to do with UPI’

It is going to be much easier for retail customers to get on to electronic payments with Unified Payments Interface.

BBPS will be launched in July by NPCI as an integrated bill payment system that will offer interoperable bill payment services to customers online and offline. It will also allow bill payments to take place through multiple modes of payments such as Net banking, credit cards, debit cards, e-wallets

In India, the credit rating infrastructure is very poor so initially, a RuPay credit card will be a marginal player as we need to take into account the security issues. We have about 22 million credit cards in the country of which 20 million are from Visa and MasterCard and about 1 to 2 million from American Express.

Manufacture and management of currency is an expensive task for the Reserve Bank of India (RBI). It spends over Rs 4,000 crore annually for printing and distribution of notes and coins. The value of banknotes in circulation increased by 11.4% to Rs 14,28900 crore as on end-March 2015 over the previous year, according to the last available data from the central bank. During 2014-15, 594,446 pieces of counterfeit notes were detected in the banking system. To bring down the difficulties in currency management and to facilitate retail payments in the country the National Payments Corporation of India (NPCI) was set up with an active support of RBI.

A P Hota, managing director and chief executive officer (CEO) of NPCI, tells Manju AB in an interview that the organisation is bringing down the transaction cost for retail customers. NPCI’s efforts with support from RBI have led to round-the-clock money transfers up to Rs 2 lakh irrespective of RBI’s working hours. Now with Unified Payments Interface (UPI) and Bharat Bill Payment System (BBPS), it is going to be much easier for retail customers to get on to electronic payments.

Three payment banks have given up their in-principle licence. Has it got anything to do with the UPI that the NPCI will set up?

Three payment bank have given up their licences but it does not have to do with the UPI, which will add to the existing infrastructure. But it will certainly have some advantages over the existing mobile wallets of banks and other companies. UPI is as easy as handing over cash or a credit card at retail store. Instead of handing over cash or a credit card you simply tell the retailer your virtual identity, which is an email id. The shopkeeper will generate an invoice through the UPI which you need to approve using your mobile phone. It will facilitate instant money transfers by invoking the virtual identity of the beneficiary and transfers money real time. It will need a single click and two-factor authentication. Here all you need is a bank account and a smartphone. 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. The biggest advantage of UPI is that it will be bank agnostic, which means that it does not require a specific bank. UPI is also one step ahead of the mobile wallets as it can send money and collect, in a mobile wallet one can send money but there is no option for collection. The unified payment system will come into commercial use by June 30.

We already have three e-payment modes – NEFT, RTGS and the IMPS – what will this do in the UPI regime?

All these payment systems will have a space for themselves. In the National Electronic Funds Transfer (NEFT), money transfers are through electronic messages. Here the bank details of the sender and the receiver are connected using any of the bank branch name and an IFSC code. When a payment is initiated, the payer’s bank sends a ‘message’ to its NEFT service centre. These messages are aggregated on an hourly basis and the respective bank’s NEFT centre sends it to the RBI, which initiates the transfer. The process takes about an hour and is available only during the bank’s working hours. Unlike NEFT, in Real Time Gross Settlement (RTGS), fund transfers are handled on one-to-one basis and this is undertaken for transactions over Rs 2 lakh. Even the RTGS is available only during the banking hours. To get over the time issue of banking hours we have set up the Immediate Payment Service (IMPS) which is a big relief specially when bank staff goes on strike etc the IMPS will work. Here the user is given a 7-digit Mobile Money Identifier (MMID) Code. The sender initiates payment using mobile bank by giving the MMID code and registered mobile number of the beneficiary. Most banks offer this service free-of-cost now. It is a round-the-clock immediate payment service. So all these services will co-exist.

Will it improve the electronic cash transaction in the country?

Now we have few banks on the network. Gradually all the lenders will be linked. The ease of using it will be its unique selling point. The mobile mobile banking applications are a bit cumbersome to use in the sense that the user needs to know the IFSC code, bank account number and a lot of other details which is a deterrent for large number of customers. Sometimes people are uncertain about the security of sharing the personal banking details considering the number of fraud cases. To use the UPI one needs to just have a email id with a bank and transactions can take place.

The Bharat Bill Payment System is another infrastructure that you are bringing in for bill payments all over the country.

BBPS will be launched in July by NPCI as an integrated bill payment system that will offer interoperable bill payment services to customers online and offline. It will also allow bill payments to take place through multiple modes of payments such as Net banking, credit cards, debit cards, e-wallets, and even by cash in case of offline mode, and get instant confirmation. It will be a one-stop shop to pay all utility services like electricity, water, gas, telephone and direct-to-home (DTH) television service. It will facilitate bill payments irrespective of the company and the location of the customers. For example, now if you want to pay a bill of MSEB Pune it is now linked only with Bank of Maharashtra so you have to be a Bank of Maharashtra customer. Bharat bill payments will link up with all the public utilities in the country and synchronise the bill payments. The intention of the new national payment infrastructure is to get people to move to electronic transactions.

Is there an estimate of how much cash moves in the system?

Cash is expensive and cumbersome to use. RBI spends about Rs 4,000 crore annually to print currency notes. About 95% of the personal consumption expenditure is on cash. It was 100% earlier but thanks to the efforts taken by banks, the mobile wallet companies and also by NPCI that gradually people are moving to electronic transactions. Electronic payments are also easy to keep track unlike the cash payments where it is difficult to trace.

A desi credit card that NPCI promised is something people are waiting to see. When is it coming?

Credit is an asset product of the bank so one needs to be careful while launching it. In India, the credit rating infrastructure is very poor so initially a RuPay credit card will be a marginal player as we need to take into account the security issues. We have about 22 million credit cards in the country of which 20 million are from Visa and MasterCard and about 1 to 2 million from American Express. The idea of a desi credit card was to bring the transaction costs down.

How is the performance of the RuPay card?

Visa and MasterCard had connected 53 banks with RuPay NPCI has connected with 618 banks and institutions in the country. With 267 million cards, RuPay now controls 24% of the ATM transactions and 7% of the e-commerce transactions. The Jan Dhan accounts also made it easier for the RuPay to spread across various pockets in the country.