Value of UPI trans­ac­tions up 753%

After a stel­lar per­for­mance in 2018, the plat­form’s up­dated ver­sion, UPI 2.0, seen tak­ing growth fur­ther


While dig­i­tal pay­ments saw a surge after the de­mon­eti­sa­tion of late 2016, the pace of adop­tion has since been much slower than an­tic­i­pated. Dig­i­tal trans­ac­tions have only inched for­ward in the past year but with a sig­nif­i­cant ex­cep­tion, the gov­ern­ment-pushed Uni­fied Pay­ments In­ter­face (UPI).

UPI crossed the ~1 tril­lion mile­stone for monthly value last month, grow­ing nearly eight times over a year. It also achieved a monthly vol­ume of over 600 mil­lion, four times the vol­ume of trans­ac­tions in De­cem­ber 2017, ac­cord­ing to data from Na­tional Pay­ments Cor­po­ra­tion of In­dia (NPCI).

The to­tal pay­ments in­dus­try saw a rise of 27 per cent in vol­ume and a fall of one per cent in Novem­ber 2018 over Novem­ber 2017, ac­cord­ing to data from the Re­serve Bank of In­dia. The forms of pay­ment cover cards, mo­bile wal­lets and mo­bile bank­ing -- data for these are only avail­able till Novem­ber 2018.

Card trans­ac­tions saw growth of 22 per cent in vol­ume and 18 per cent in value in Novem­ber 2018 against Novem­ber 2017. Dur­ing this pe­riod, wal­lets grew 86 per cent in vol­ume and 72 per cent in value. UPI, how­ever, grew 400 per cent and 753 per cent, re­spec­tively.

UPI is fairly new in the e-pay­ments space. It was launched in Au­gust 2016 with 21 part­ner banks and saw monthly trans­ac­tion vol­ume of less than 100,000 and value of ~3 crore, re­spec­tively, at the time. The plat­form has seen strong growth ever since.

NPCI at­tributes UPI’s suc­cess to three fea­tures - sim­ple, seam­less and se­cure. These, it says, de­liver to the needs of the con­sumer, mer­chants, banks and fi­nan­cial tech­nol­ogy en­ti­ties.

“UPI was a game changer in the true sense, with com­plete in­ter­op­er­abil­ity be­ing driven on the fron­tend us­ing a mo­bile phone, with re­duced fric­tion while on-board­ing and se­cured two-fac­tor au­then­ti­ca­tion,” said NPCI, in re­sponse to an email query.

ICICI Bank’s chief tech­nol­ogy and dig­i­tal of­fi­cer, B Mad­hivanan, said UPI had the un­der­ly­ing plat­form of IMPS, al­ready a mar­ket leader. UPI has not eroded into older plat­forms. UPI grew faster be­cause it re­moved a layer of fric­tion — it re­placed the ac­count num­ber

and IFSC code with a UPI iden­tity. “All the onus of mak­ing a trans­fer was on the sender be­fore. UPI’s Pull trans­ac­tion fea­ture put the onus on both sides,” he ex­plained.

Ma­hesh Makhija, leader, emerg­ing tech­nolo­gies, at con­sul­tants EY In­dia, says UPI is cost-ef­fi­cient and as­set-light when com­pared to al­ter­na­tives. And, in most cases, can be ac­ti­vated by the re­cip­i­ent (mer­chant or busi­ness) on a self-serve model.

UPI in­fra­struc­ture was given a fur­ther boost with the en­try of global ma­jors Google (Google Pay) and Face­book (What­sApp Pay). Mad­hivanan says these com­pa­nies brought not only newer tech­nol­ogy but also enor­mous ve­loc­ity and cash-backs.

UPI al­ready has nearly twice the monthly vol­ume that e-wal­lets do. It is now ex­pected to see a ma­jor boost in both vol­ume and value of trans­ac­tions, with new fea­tures in the form of what is termed 'UPI 2.0'.

Ac­cord­ing to Navtej Singh, chief ex­ec­u­tive at the dig­i­tal busi­ness of Hi­tachi Pay­ment Ser­vices, peer to peer trans­ac­tions con­tinue to dom­i­nate UPI vol­umes but mer­chant trans­ac­tions are start­ing to pick up.

“UPI 2.0 has ex­tended the fea­ture of over­draft fa­cil­ity and bridged the gap be­tween mer­chants and cus­tomers, mak­ing UPI a more holis­tic so­lu­tion,” he added.

Be­side the over­draft fa­cil­ity, UPI 2.0 is set to of­fer fea­tures such as One Time Man­date, In­voice in the In­box, Signed In­tent and QR. This will of­fer a big-can­vas for banks and fi­nan­cial tech­nol­ogy en­ti­ties to col­lab­o­rate and de­liver value for con­sumers, says NPCI.

“The big­gest dis­rup­tor is the one­time man­date fea­ture. It can make the pay­ment ex­pe­ri­ence much more seam­less and, at the same time, give greater con­trol to the cus­tomer,” avers Kalpesh Me­hta, part­ner at con­sul­tancy Deloitte In­dia. The fea­ture can en­able mul­ti­ple-use cases, push­ing its adop­tion. “The only chal­lenge is that its set-up and the un­der­stand­ing of its fea­tures will pos­si­bly be lim­ited to dig­i­tally savvy smart­phone users,” he added.

Last year, for­eign pay­ment providers had to face reg­u­la­tory blocks such as the rules on data lo­cal­i­sa­tion. The Supreme Court’s Aad­haar judge­ment has left e-wal­let com­pa­nies hang­ing, with no means to elec­tron­i­cally ver­ify cus­tomer doc­u­ments or get on board new cus­tomers. The gov­ern­ment’s heavy sup­port for UPI, how­ever, pro­tects it from such threats.

In Oc­to­ber, the Re­serve Bank of In­dia is­sued wal­let in­ter­op­er­abil­ity guide­lines though the UPI net­work, en­abling di­rect ac­cess for wal­let com­pa­nies. Pre­vi­ously, they had to use a bank to ac­cess the net­work.

NPCI says wal­let in­ter-op­er­abil­ity should pave the way for in­creases in dig­i­tal trans­ac­tions and adop­tion. It also sees growth com­ing through the man­date of the Se­cu­ri­ties and Ex­change Board of In­dia for ini­tial pub­lic of­fers of eq­uity to move com­pletely to UPI, in a phased man­ner.

“Like­wise the var­i­ous other en­hance­ments, fea­tures, en­com­passed in UPI 2.0 shall pro­vide the ground for fu­ture growth,” states NPCI.

Source: NPCI

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