NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, May 23, 2016

Mobile payments just got a leg-up, thanks to the Unified Payment Interface (UPI), probably the only app of its kind in the world. Virtual wallet services have been around for a while now. UPI goes a step further and allows you to make payments by simply entering the payee’s virtual ID on your smartphone and feeding the PIN the app requests. The money is debited directly from your account and transferred to the payee in a matter of minutes, without you having to provide either your bank details or the payee’s bank IFSC code. In a few simple steps you can make transactions worth up to a lakh. The app on your phone need not be of the bank you hold your account in, but of any bank whose user experience you prefer. The same goes for the payee. But the transactions still take place between the underlying banks, without you even knowing about it. No need to worry about your credit card details being compromised.

Making all this happen is the National Payments Corporation of India (NPCI), an umbrella organisation under the Reserve Bank of India (RBI) for all retail payments in India. The NPCI has aligned with 15 banks, including the State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC to provide the service. A dedicated team from NPCI is working on developing the app and coordinating with the tech teams of the various banks to make it a reality, a virtual reality, so to speak.

But is it a new app?
The UPI will not be a single app but will allow banks to either incorporate the UPI function in their existing apps or launch an all-new UPI app. “There is no common app,” says Dilip Asbe, Chief Operating Officer, NPCI, “because that would have killed innovation. We want the innovation in the front end to grow to the capability of the industry and the ecosystem.” “What we have in India is the most sophisticated public payments infrastructure in the world,” RBI Governor Raghuram Rajan said while announcing the UPI’s impending launch. “It is not just payments that are part of this revolution, but a whole new set of banks that are coming in.”

The story in numbers
In 2015, the central bank gave in-principle approvals to 11 payment banks and 10 small banks. India has an unbanked population of 233 million in 2015, according to PwC, India.