How India’s UPI ecosystem has impacted customers and digital payments?
Disclaimer: All the stories I share are my own hypothesis. I do not intend to harm or object any person, product, job, or community; intentionally or otherwise. Hope you enjoy a good read!
With the advent of UPI, digital payments which once seemed a huge burden has now become a child’s play. UPI has done the unthinkable, not just on the Indian payment mechanism, but has also set standards of payment interoperability at the global level.[1] From a roadside seller to bill payments, UPI is accepted everywhere, especially in the metro cities. According to Deccan Herald, Bengaluru recorded the highest number of UPI transactions in 2019 and 38.1% of Bengalureans use UPI for making payments which essentially means that UPI has been adopted by people happily. UPI payments also saw a major surge during lockdown after a lot of people avoid paying or accepting cash due to fear of Covid-19 virus.[2]
How UPI solves the user problems?
- Simplified payments: UPI has simplified the process of sending money as simple as sending a message to someone. With a single pin, you can send money to anyone through their mobile number, UPI id, and even to a bank account number. No need of remembering someone’s account number, waiting for hours to reflect it in the account. UPI has enabled instant money debit and credit.
- Easy to set up: To set up UPI, all you need is a bank account and a mobile number and a pin to remember to set up the UPI. No more hassles of net banking where you had to request the bank for net banking user ID and password and waiting for the request to get approved. Not only this, even if you cannot afford a smartphone, you can still use UPI on a normal GSM keypad phone.[3]
- Easy bill payments and EMIs: With UPI, users can pay electricity, water, phone bills and any EMI, loan instalment etc. with UPI. No hassles, waiting in lines or paying commissions on bill payments. With UPI, the e-commerce industry has benefitted a lot. Online orders have increased with the UPI and customers prefer UPI as the primary mode of payment on these orders.[4]
- Easy to go online: With UPI, it is now very easy for small businesses to accept payments online. No more hassles of keeping credit records of customers in the diary.
How UPI helps the Government?
- Better traceability of funds: Every transaction done via UPI is linked with a transaction ID and the Government can easily figure out where the cash is flowing for any individual or business.
- Taxes and black money: With better traceability on UPI, it has become difficult for everyone to prevent taxes and hide black money since every transaction (no matter how small) is linked to the bank account.
- Global standards on Fintech domain: With every new advancement in UPI, India is setting standards for the Fintech industry, especially in the area of digital payments at the global level. Ever since UPI was launched in India, players like Google already set eyes on it and benchmarked this technology at the global level [5]. With India setting global standards on financial technology and fund-flow, shall surely lead to the better economic health of the country.
How UPI helps the fintech industry?
UPI has brought a significant boom in the Indian startup ecosystem by introducing new players in the fintech industry. The new integrated payment gateway solutions use UPI in their core business logic. Razorpay, PhonePe, PayTM are prime examples of Indian startups in the digital payments domain who have achieved immense success and entered the unicorn club in the Indian startup ecosystem. [6]
Is UPI really that perfect?
- UPI pin security: UPI pin is generally a 4-digit or 6-digit pin and it is the only layer of security to transfer fund. Although the apps have integrated biometrics to use the application but after you are in the app, to transfer the fund you only require this UPI pin to transfer the money.
- Deep links and fake call centres: The fake call centres which are designed to take money from innocent people are all around the country. These people design customised QR codes which deep-link directly to the UPI payment and with a single scan, the money gets deducted from the user’s bank account. Netflix Jamtara has shown this event in the form of TV series.
- Payment delay: Payment delay is one of the biggest challenges in UPI technology. UPI has been introduced as an instant paying mechanism but numerous times it has failed to achieve its purpose. At crucial times, UPI fails by having the payment in processing due to one of the banks not responding. This results in the debit of payee but the receiver doesn’t get the money which leads to disputes, frustration, repayment, refunds and the biggest of all — lose of trust.[7]
- Limit on the amount: Currently, there is a limit on the amount you can send via UPI in a single day which is capped at INR 1,00,000, so this is not a technology for funds exchange which involve a huge amount in a single day or transaction. Although, this limit can also be seen as an advantage to prevent frauds.
