Technological advances in the banking space are altering the way Indians perceive retail payments. With the latest initiative of a unified payment interface (UPI) by the National Payments Corporation of India (NPCI), mobile phones have been practically converted into mobile banks.
The UPI , which is a first of its kind across the world, is designed to enable users to send and receive money through their smartphones from their existing bank accounts, using certain unique identification details like Aadhaar number, mobile phone number or a virtual payments address without having to enter their bank account details. All that users require is an application downloaded on the phone and they are good to go.
While the benefits of this will be immense to customers because of the ease of making payments across a multitude of retail services, the banking system as a whole will also enjoy a good payback.
According to a report by JM Financial, “the move towards e-payments economy can result in significant benefits a) contained cost of currency management, b) higher operating efficiencies for banks and merchants, c) cross sell opportunities as banks would have data to analyse spending behaviours, d) higher tax compliance along with clear audit trails and e) financial inclusion and effective directed benefits”.
The UPI particularly gains significance considering that India lags noticeably behind other countries in terms of non-cash transactions.
A report by the Mobile Payment Forum of India (MPFI) released in February this year, pegs the number of non-cash transactions per person at just 6 per year. It also points out that only a fraction (0.6 million) of the 10 million plus retailers in India have card payment acceptance infrastructure.
Considering India has a booming telecom market with roughly a billion cell phones in use and nearly 6 million more added every month, the UPI has huge potential and would certainly serve the larger purpose of providing a leeway to the banking system to focus only on core banking activities.