United Payment Interface set to go live from July 31

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By George Mathew, The Indian Express

Buying groceries or vegetables and paying bills will soon become even faster and smoother. The much-awaited desi payment system via smartphone — Unified Payment Interface (UPI) — will go live on July 31 giving a big boost to the efforts of the Reserve Bank of India (RBI) and banks, hit by a spike in bad loans, in moving towards a ‘less-cash’ India.

“This is a revolutionary product and it will be a game changer,” said AP Hota, managing director and CEO of National Payment Corporation of India (NPCI). “By July 31, 15 banks including private and public banks, will be part of UPI. Another 15 banks, including State Bank of India and HDFC Bank will become part of UPI by the end of September,” he said.

“We expect all banks to become part of UPI by March 2017. UPI is now on the top of the IMPS (immediate payment service system). There are 120 banks in the IMPS. All these banks will have to become part of the UPI to make it a revolutionary digital payment system,” Hota told The Indian Express.

After UPI, NPCI — promoted by banks and supported by the RBI — is planning to launch Bharat Bill Payment System (BBPS) in August, electronic toll collection (ETC) in September, National Common Mobility Card in October and RuPay credit card in November. Although a large number of banks are offering mobile banking services, these are not completely inter-operable, especially for merchant transactions.

This, in turn, has impacted the use of mobile payments for merchant or P2B (person-to-business) transactions. Full operationalisation of UPI, which aims at this customer convenience, will provide the standard interface for communication across different mobile-banking applications of banks thus facilitating inter-operability in P2B payments.

RBI Governor Raghuram Rajan had recently said he’s “especially enthused by UPI, as smartphones become more widely available”. A villager needing to pay a shopkeeper only needs to know the latter’s alias — say Ram@xyzbank.psp.

He feeds that into his mobile app, writes the payment amount, puts in his password, and presses ‘send’ and the payment is made, with both getting messages to that effect. “Neither needs to visit the bank to take out or deposit money, no point of sale machine is needed.

With the price of smartphones falling sharply, we are on the verge of solving the last mile problem,” Rajan said. The RBI is planning a comprehensive review of the prepaid payment instruments (PPI) guidelines which will be undertaken keeping in view the changing scenario.

The guidelines will be reviewed to address issues related to customer registration for mobile banking, safety and security of transactions, risk mitigation and customer grievance redressal measures, the RBI said in its Vision-2018 document.

“NPCI has started the process of releasing a white paper on significant issues relating to retail payment systems,” Hota said. According to Hota, 2016-17 will witness launch of five new services — UPI in July, Bharat Bill Payment System (BBPS) in August, eletronic toll collection (ETC) in September, National Common Mobility Card (NCMC) in October and RuPay credit card in November.

Collection of toll, largely done in the form of cash payments, is another segment where efforts to migrate to electronic payments have been sporadic and isolated. Such disparate developments have led to the propagation of different systems in different parts of the country, causing confusion and inconvenience to the customers.

The RBI has said electronification of the toll collection systems on a pan-India basis in an interoperable environment will be encouraged. NCMC is expected to be launched by October 2016 by NPCI.

This segment which has a huge potential for migrating large number of small value cash transactions to electronic payments, is in the area of mass transit (road transport, metro rail, etc.).

There have been developments in recent times to put in place automated fare collection for mass transit systems, all of them work on proprietary systems and standards, thus coming in the way of inter-operability.

The focus will be to ensure that the payment mechanisms being put in place in this segment are interoperable and built on open standards, preferably using open system payment instruments.

The launch of UPI and a host of other products are expected to bring banks back into reckoning in the technology revolution in the banking sector. Banks have been the traditional gateway to payment services.

However, with the fast pace of technological changes, this domain is no longer the monopoly of banks. Non-bank entities are providing innovative payment products and services, forcing banks to reflect upon a strategy — to compete or to collaborate.