2 min read.Updated: 17 Dec 2019, 03:45 PM ISTTinesh Bhasin
Based on its experience with the UPI in India, Google has offered the US Fed Board suggestions for developing FedNow, an interbank real-time gross settlement service for digital payments
Based on its experience with the Unified Payments Interface (UPI) in India, Google has offered the US Federal Reserve Board suggestions for developing FedNow, an interbank real-time gross settlement service for digital payments. Mint analyses the salient features of UPI.
From a modest start in April 2016, UPI has grown faster than other mode of digital payment in India. The framework is changing the digital payments landscape in the country as transfers happen in real time. For end users, the process is simple and easy. Transactions require minimal details and a virtual address. UPI’s growth and adoption have led to expectations that it will have the largest pie of digital transactions over the next few years. National Payments Corporation of India, which developed UPI, set up a subsidiary to help governments and central banks implement similar instant fund transfer in their countries.
What attracted global tech giants to UPI?
National Payments Corporation of India (NPCI) conceptualized the UPI framework from scratch. It kept the framework open to give flexibility to build on it. Any tech firm can design and develop the UPI app and let users manage transfers into and out of their accounts. Whether it is an app from a bank or a third-party tech firm, the interface remains the same for the end user. NPCI doesn’t have any special requirements for non-banks to start offering UPI through their apps. Being present in the payments space, tech firms get a massive amount of data that they can use for different purposes.
In his letter to the Federal Reserve, Mark Isakowitz, Google’s vice president of government affairs and public policy for the US and Canada, said the annual run rate of transactions through UPI touched 10% of India’s GDP since its August 2016 launch. UPI transactions in November hit 1.2 billion, 6.1% higher than in October and 132% higher year-on-year, said NPCI.
What is working in favour of UPI?
Most banks have kept UPI transactions free of cost. UPI’s significant feature, which even a Google executive highlighted, is its real-time settlement. Transfers are instant from one bank account to another round the clock. The user does not need to share credentials such as bank account details or bank codes. An individual can use multiple bank accounts on a single app. For the first time in India, a receiver can ask for money via the app, making it easier for merchants to use it. Its two-factor authentication makes it secure.
How is NPCI making it more attractive?
NPCI has been adding more features to the UPI framework. In August 2018, it launched UPI 2.0, which lets customers link over-draft accounts to the interface. It added features for merchants such as support for invoicing. Soon, UPI apps will see features such as standing instructions, which allow the possibility of recurring payments such as SIPs in mutual funds, and monthly subscription. Reports say Indians travelling to Singapore and the UAE would be able to pay via UPI for goods and services there in a few months.