The Unified Payment Interface or UPI is gaining ground. After one year of its launch, the UPI payments has gained the express speed. There have been 76.7 million UPI transactions during the October 2017. While it was only 30.8 million in September. This surge in the UPI payments happened because of the push it got from the Google Tez.
The Google is heavily promoting its UPI based app Tez. After the BHIM app, Tez is giving a big push to the UPI payments. One year back, the BHIM app has changed the way we pay digitally. If you used the BHIM app, you would have loved its simplicity and ease. To cash the popularity of BHIM, the UPI payment system was renamed as the BHIM-UPI.
The rising popularity of BHIM-UPI can be the next gamechanger in India. If this speed of UPI adoption continues, The cashless economy would be a reality soon. However, this rapid progress of BHIM UPI can be dangerous to the ‘payment apps’. As It would also make the existing mobile wallets irrelevant.
UPI 2.0: The Next Big Leap
Soon, you would see new features in BHIM-UPI. The NPCI is working to make this payment system more useful and user-friendly. You would see following two features in UPI 2.0.
- Biometric Authentication
- Pre-authorised Transactions
As of now, you enter UPI PIN to complete the transaction. To make it simpler, the BHIM-UPI may permit the use of biometrics instead of the PIN. These biometric authentications can be your fingerprint or image of iris. However, these features would work only on those smartphones which can capture these details.
The biometric authorization would make the whole fund transfer process faster. As you can keep your finger in the slot while transferring money. In this case, you would not require any authorisation, indeed.
As of now, a UPI payment takes place only after our approval. But, there may be some payments which are of a regular nature and you don’t want to approve it every time. The pre-authorisation facility of UPI of would be the answer to this.
Like ECS mandate, you would be able to pre-approve a payment to the beneficiary. The payee would be able to ask an amount and get it immediately without your approval. You would only get a notification of this payment. Of course, you can limit the amount of such automatic payment.
This automatic payment would be set for each payee. And you would be able to revoke this mandate anytime. This facility would be useful to pay the electricity bill, mobile bill, taxi fare, school fees payment.
How UPI Pre-Authorisation Would Work
Let us understand the pre-authorisation of the UPI from an example.
- Suppose, you go to your mobile payment app and pay the monthly bill using the UPI.
- During the payment, the app asks you to approve an automatic monthly payment.
- You set the date, frequency and maximum amount of the payment.
- From the next month, the biller would request for payment.
- The UPI system would recognize the biller and tally with your pre-authorization details.
- If the biller details matches, the system itself would process the payment immediately.
- This payment schedule would be repeated every month until the given date.
Because of this pre-authorization, you would never miss the due date of the payment. Also, in case of frequent payments such as taxi fare of Uber and Ola, you can alight and proceed without thinking about the payment. You can check the notification message later.
UPI Challenge to Payment Wallets
We use the payment wallet such as Paytm, Mobikwick and Freecharge due to the ease of the payment. We are not required to enter the card details for each payment. The spending from the wallets is as easy as opening an app on your mobile. These wallets also give facility for pre-authorized payments.
But, after UPI 2.0, the Payment wallet would not have any unique features. The BHIM-UPI apps would compete in every aspect. Moreover, in BHIM-UPI app, you are not required to transfer money to the app. It deducts money directly from the bank account. While wallets need the regular top up.
So, after the UPI 2.0, the BHIM-UPI apps would have the ease of wallets without the need of a top up. Also, you would not need multiple wallets as RBI has directed to make wallets interoperable. It means you would be able to pay a Paytm account through the BHIM-UPI app. All the Paytm QR code at the shops would accept money from the BHIM app as well.
Many e-commerce companies are planning to adopt the UPI. Samsung has also integrated the UPI with its Samsung Pay. Whatsapp is also coming up with the UPI fund transfer. Zomato, Amazon, Netflix already working to integrate UPI.
The challenges are huge for wallet companies. Because the UPI can make them irrelevant. Today, the e-commerce companies are diminishing within a year. We have seen that various e-commerce companies are on the verge of closure.