Cardless cash withdrawal to hit debit cards
NEW DELHI: Debit cards, the primary gateway to digital banking for years, are likely to lose sheen once cash withdrawals are allowed through unified payments interface (UPI), making India’s homegrown payments system more ubiquitous, experts said.
At present, cash withdrawals are not allowed through UPI at automated teller machines (ATMs), though online and offline payments can me made. This is a gap the Reserve Bank of India (RBI) wants to fill.
Some banks allow cardless cash withdrawal specifically at their own ATMs for their customers and the RBI wants to allow the use of UPI to make this feature more accessible.
“Today the maximum usage of a debit card is at ATMs. So definitely that usage may come down to be replaced by UPI,” said Mandar Agashe, founder and managing director of Sarvatra Technologies.
Customers used debit cards to withdraw ₹2.55 lakh crore from ATMs in February, showed data from RBI.
Merchants have also been preferring payments through UPI instead of cards as there are no merchant discount rate (MDR) charges on UPI. Expressed as a percentage of any digital transaction at a point-of-sale (PoS) terminal, MDR is the charge paid by the merchant to the bank, card network, and the PoS provider for offline transactions and to the payment gateways for online purchases.
“Sellers get immediate settlements on UPI, while on cards the money comes the next day to the merchant. It comes in four or five cycles and usually with a lag based on the settlement cycle,” Agashe said.
Payments industry executives said ATMs would need a software update and the process would not involve huge infrastructure costs for banks. At present, some PoS terminals that run on Android have the capability to accept payments through cards and dynamic QR codes. Dynamic QR codes have the payment value embedded in it, while in the case of static QR codes, seen at most shops, the value must be manually put in.
Private sector lender City Union Bank has already gone live with UPI-led cash withdrawals and has partnered ATM manufacturer NCR India. For such transactions, a customer needs to scan the QR code displayed on the ATM screen using any UPI app and authorize the transaction using the UPI pin. The plan is to limit such withdrawals to ₹5,000 per transaction with a limit of two transactions per day per account, industry executives said.
“We have already implemented this in association with the National Payments Corporation of India. We are in the pilot stages with a few other banks,” said Navroze Dastur, managing director, NCR India.
Some people believe that debit cards and UPI would continue to co-exist as a large section of the population is more comfortable using cards than their mobile phones. That apart, about 400 million Indians do not have access to smartphones, which are required to read a QR code.
CUSTOMERS USED DEBIT CARDS TO TAKE OUT AS MUCH AS ₹2.55 LAKH CRORE FROM ATMS IN FEBRUARY