By Upasana Taku
A lot of people are confusing Unified Payments Interface (UPI) with an end-user app. Let’s be very clear, UPI is an infrastructure on top of which end-user apps can build and implement the features offered by UPI.
The Reserve Bank of India (RBI) Payment System Vision Document (2012-15) says that UPI envisages a payments architecture that is directly linked to achieving the goals of universal electronic payments, a less-cash society, and financial inclusion, using the latest technology trends.
A mobile wallet on the other hand, is a digital/ electronic form of physical wallet that you can use to make payments, transfer money, and perform most activities that you can with cash. UPI is a new technology infrastructure that existing bank apps can integrate with, in order to facilitate easy funds transfer and other monetary transactions between two people in a secure and convenient manner.
Currently, in order to enjoy the benefits of mobile banking using bank apps, users are required to know IFSC code, bank account number and a lot of other details. This creates a lot of friction in using the app, thereby discouraging many. Also, since people are wary about sharing personal banking details, bank apps haven’t been very popular. UPI will bypass all this by making transactions easy without the need for personal details.
Mobile wallets, today are as mainstream as debit or credit cards. Cash is still the king of payments, and that is a hurdle that UPI has to overcome in order to drive mobile payments into mainstream consciousness. The ease of payments through cash is what makes it such a popular means for transaction. Cash is ubiquitous, requires no form of electronic equipment or technical know-how to transact with, and is equally popular in urban and rural areas.
The benefits of using a mobile wallet are multi-fold. One does not have to haggle for change, nor worry about a trip to a nearby ATM to withdraw cash. It is a secure, convenient and efficient way to pay for things without having to carry multiple credit or debit cards or even wads of cash and coins.
Mobile wallet adoption in India has risen significantly in the last couple of years as smartphones and mobile internet have become an inseparable part of our daily lives. With better phones and faster data connections, transacting through a mobile wallet is an easy affair.
Private mobile wallet firms have invested in creating merchant networks to ensure a smooth and failure free payment process. Discounts and cashbacks are aimed at increasing awareness and prompting trial usage of a mobile wallet among users.
At MobiKwik, however, we have observed that a significant number of our customers transact regularly even when there is no cashback offer/scheme. Mobile wallet companies also have offerings which are unique to them and provide users with a wide range of benefits, such as cash pick-up, micro-credit facilities, and hyper local transactions, which UPI can’t offer.
There has been a lot of speculation that UPI is the beginning of the end for mobile wallets. In my view, that is a very premature and uninformed contention, given that mobile wallet companies in India have more customers than any of the existing bank supported apps combined.
The potential that UPI holds is tremendous and promising, nonetheless. When implemented at full scale, it will popularise the concept of mobile payments and also facilitate digital banking. Currently, one has to make time consuming, and many a times inefficient, trips to the branch office of a respective bank in order to access its services. UPI will do away with these trips since it is based on the already existing Immediate Payment Service (IMPS) system which works 24×7.
Last year, India crossed 1 billion mobile phone connections in India, and this year smartphone shipments will overtake feature phone shipments. This opens up doors for banks to take the goal of financial inclusion to the unbanked populace of India.
Mobile wallet companies in our view will continue on the front foot for the following reasons:
In the case of UPI, it is unclear how the front-end would work for users. Who would design it, tying in existing bank interfaces, apps, and properties? Will it be effective? Without delivering a great user-experience, consumer adoption of UPI is unlikely.
Most existing financial and governmental digital schemes are woefully designed, and don’t even have a mobile responsive website, let alone a mobile app. Even the apps that exist are in need of a massive rejig in terms of design and user interface, something that private technology and startup firms excel in. Most users will discontinue transacting on a platform if their first few experiences turn out to be less than satisfying, leave alone problematic.
Secondly, winning consumer and retailer trust, and delivering a seamless user-experience is key to driving growth for mobile wallets such as MobiKwik. It wasn’t easy for us and we see that it is still extremely difficult for banks. However, thanks to our better understanding of technology, we were able to turn those two factors into competitive advantage. How UPI intends to solve that challenge for banks remains to be seen.
Banks aren’t completely computerised, which adds to the list of problems for UPI. Implementing UPI will mean training merchants, staff, retailers, improving point of sale systems, and upgrading existing technology among others, all of which translates to significant investment. This will be needed to ensure wide scale adoption of UPI. Additionally, Indian consumers are wary of transacting online which is why Cash on Delivery remains the most popular form of digital payment. How will existing banks endeavour to improve trust levels among consumers?
Lastly, mobile wallets offered by banks don’t have the same traction as stand alone mobile wallet apps.
Indeed, UPI is a landmark development in technology adoption by banks with the goal of driving India towards a smart, cashless and connected economy. Mobile wallet companies have already partnered with several bank,s and UPI will in fact act as an additional lever for wallet companies to integrate further with the banking system and also add more merchants.
Editor’s note: The author is co-founder of MobiKwik Mobile Wallet.