1. How does this system benefit as far as financial inclusion is concerned?
UPI is likely to be the leading payment platform for newly added accounts under the Jan Dhan Yojana (PMJDY) and direct benefit transfer programs due to seamless and user friendly process of registration and transacting. There is also a provision for financial institutions to integrate their Aadhaar based KYC into their applications that use UPI, which will strengthen the usage of the platform.
2. Would this system also be bio-metrics operated?
The phase 2 of UPI infrastructure is likely to support biometrics credentials. The credentials which will be in encrypted form, will be cross checked with the biometric database with Unique Identification Authority of India (UIDAI) database. Once verified, the transaction will be executed in an instant.
With a surge in biometric enabled smartphones in near future, there is likelihood of customers using the facility more often as it will be much more convenient option for customers to transact.
*3. How costly is adoption of the UPI system. What are the main challenges so far? *
From bank’s perspective, since the platform is running on IMPS, there is no typical infrastructure cost attached. However, there is a development cost, which includes UPI interface and PSP application. This is the only key cost attached for the banks which are there on IMPS platform. Banks are currently facing major challenges of understanding the specification and overall framework for implementation. For banks, which are not on IMPS platform, or in the process of getting on the platform, need to understand the IMPS infrastructure and processes to overcome the challenges for deploying UPI system.
4. What is the comfort level of banks and the RBI with this new payments system?
UPI is a revolutionary payment platform that has changed the payments landscape by making money transfers super easy. Currently 21 banks including some of the largest lenders in India went live on the UPI platform and few more banks are likely to enter the space by end of this year. Even the RBI is looking at the newly developed payment platform as the game changer as it is helping them achieve the payments and settlement vision 2018 of less cash and more digital society. RBI also is very comfortable with the platform since it will serve the issue of last mile financial services for the banks and financial institution in a seamless manner. We are also seeing adoption by Fintech and payments companies entering into UPI fray by partnering with member banks of UPI thus driving the electronic payments. For instance, mobile payments start-up PhonePe, which is owned by Flipkart, has partnered with Yes Bank to launch UPI based payments app.
5. How is UPI any different from existing NEFT or RTGS transfer procedures that most banks follow?
For enabling transactions through UPI, customer does not have to remember account number, IFSC code or the bank branch of the recipient. The customer will need just one virtual ID, similar to an email address for authentication. Further, it runs on IMPS platform which enables real time sending and receiving of money, thus customer can use the service round the clock during the year, unlike other systems. Thus, being faster and easier than the current payment systems such as NEFT and RTGS, it is likely to have faster adoption.