Unleashing Tech to Move Money: Keep the Rules Simple
In less than a fortnight, a new technology that neither banks nor their customers are fully prepared for will be tested. A person with an account in one bank can download the app of another bank to send money to her friend having an account in a third bank and preferring to use the app of a fourth bank. A shopkeeper can ‘pull’ money from buyers’ account — just as he swipes a credit or debit card after a purchase — by using his handheld device once the customer clicks ‘yes’; (today, buying a movie ticket or a book using mobile wallets are ‘push’ transactions that buyers initiate to move money to merchants’ accounts and not the other way round).
Up to ₹ 1 lakh of such fund transfers will be possible from a cell phone using Unified Payment Interface (UPI). Developed by the National Payments Corporation of India, UPI — the new technology — promises to transfer funds from one bank account to another with just a click on a mobile app.
Anyone transferring funds will have to type in either the 12-digit Aadhaar number or a virtual address of the person to whom the money is being sent. Similarly, the merchant pulling money from a customer’s bank account will have to ask for the Aadhaar number or the customer’s virtual address (provided by the banks).
About 20 banks have agreed to participate on the UPI platform. Many are unsure how this would turn out: whether banks with more attractive and user-friendly apps start poaching customers — surely, a bank whose app is downloaded would closely track customer expenditure and soon start luring them with offers and deals; whether shrinking float of banks would further shrivel; whether customers would find the mode of payment via UPI as simple as using mobile wallets (that have grown fiercely).
But the disruptive force that UPI promises would be fully unleashed if users have the choice to type in the mobile number instead of the Aadhaar number or the virtual address (like XYZ@SBI.com) that the bank offers. Mobile numbers are easier to remember and manynumberswouldbestoredin the contact list in the phone. The RBI has, however, disallowed the use of cell phone numbers to move moneyinUPI.
Since mobile numbers change, a large number of cell phone users have prepaid connections, and telcos often recycle a number once a user surrenders it, the regulator, perhaps, felt that Aadhaar or a virtual address would be a more secure and stable payment option. Also, some buyers may be unwilling to share mobile number with merchants doing a pull transaction; it could also be intended to popularise Aadhaar. The regulator intends to allow the use of mobile numbers for UPI transactions at the later date.
But this in some way could be limiting the scope of UPI. No one remembers the Aadhaar number; even fishing it out from the wallet to either read out or key in the 12-digit number is cumbersome; on the other hand, the virtual address would only add to the long list of log-ins and passwords that have to be memorised. This is perhaps one of the reasons why ‘Immediate Payment Service’ (or IMPS) — an instant, inter-bank, electronic fund transfer service has been slower to catch on. To use IMPS one has to remember a seven-digit number known as the mobile money identifier.
If NPCI and banks have to leverage on UPI’s potential, they would have to map the mobile phone numbers of customers and figure out ways sooner than later in allowing them for payments. Stifling Basel rules on maintenance of minimum capital and unsettling new technologies have made life difficult for banks. Things can only become tougher in the days to come. If digital money and mobile banking are the new games, it may be profitable to keep the rules simple and user-friendly.