New, improved
The National Payments Corporation of India launched UPI 2.0 as an upgrade to the first iteration of the Unified Payments Interface that debuted in April 2016. Mayank Jain finds out what's new.
What are the new features?
The new UPI upgrade, dubbed UPI 2.0, comes with several new features such as the ability to attach invoices with payment collection requests, signed QR codes that verify the money receiver, the ability to block payments for future settlement and the ability to link overdraft to the UPI apps.
What steps were taken to make it more secure?
The new features of UPI 2.0 make digital payments more secure, says Dilip Asbe, CEO of National Payments Corporation of India (NPCI). Features such as invoice of purchases along with collect requests from merchants assure consumers that they are paying the right amount to the right person. Similarly, signed QR codes limit the possibility of fraud in the payments mechanism by ensuring that the code can’t be copied by anyone trying to intercept payments.
Does it take into account the demands of the credit industry?
UPI 2.0 tries to incorporate many of the demands that the lending industry had been making on the NPCI for some time now. UPI 2.0 features such as invoice on payments provides banks and lenders with additional data about a customer’s buying history and pattern. There is a one-time block function that is helpful in cases when one books a service at one point but takes time to consume it. For instance, one can book an Uber and block payment till the end of the ride.
There is a proposal in the works to use NPCI collected data to do cashflow based credit scoring for individuals and merchants. This scoring can help sub-prime borrowers, who may not have a strong credit score on traditional bureaus, to access loans. A public credit registry, proposed to be set up by the Reserve Bank of India (RBI), is a step in that direction.
Why did it take so long to launch?
UPI 2.0 was supposed to be launched at the beginning of this year, but the date kept getting pushed back due to the time taken by regulators such as the RBI to sign off on the updates. According to sources, one of the major issues raised by the regulator was the proposed feature of making recurring payments through the UPI interface. This would have allowed the banking and the finance sectors to collect loan, mutual funds and insurance payments at regular intervals from the users’ accounts automatically. The RBI gave its approval to the UPI 2.0 app after some features were removed and some others watered down.
What do we know about its most active user base and volume/value of transaction?
Since its launch in 2016, UPI has seen stellar growth both in the volume and the value of transactions, especially after demonetisation when people actively scouted for digital alternatives to cash payments. UPI is live with more than 97 banks currently and merchant transactions have reached almost 25 per cent of the total volumes, according to sources. BHIM UPI recorded transactions worth ~458 billion in value and 235 million in volume in July 2018.
Why did the much anticipated e-mandate not come in UPI 2.0?
There were concerns about customer awareness when it came to digital payments and it was considered a step too fast to allow people to make infinite mandates for auto-debits from their accounts. While the proposed e-mandates would have provided an option to the user to cancel it anytime he wanted, the regulator wasn’t too comfortable with the feature just yet.
How does it boost digital payments for merchants?
UPI 2.0 is specifically aimed to boost digital payments for merchants as that’s one area where digital transactions haven’t taken off according to expectation. Features like invoices and one-time block are likely to increase people’s faith in digital transactions. At the same time, signed QR codes and verified virtual payment addresses will reduce the potential for fraud. The ability to link overdraft accounts is also being seen as a boost for merchants who can now access credit much more easily.
However, the complete rollout of all UPI 2.0 features across apps and merchants is likely to take some time. Asbe said that the soft and hard rollout should be completed by March 2019 even though some companies have already started upgrading their systems to incorporate UPI 2.0.