• New transfer protocol to simplify transactions for online wallet companies

    Online wallet companies Paytm, Mobikwik and FreeCharge aim to integrate their services with the new electronic fund transfer protocol launched by the National Payments Corporation of India, in a move aimed at ensuring their business is not rendered superfluous by this new platform.

    The Unified Payments Interface (UPI), which comes into effect Monday, is a single interface across all National Payments Corporation of India (NPCI) systems, allowing customers to instantaneously transfer funds across different banks with the use of a single identification and password.

    Multiple bank accounts can be linked to a single mobile banking application and money can be both received and requested through the same interface. This could weaken the case for consumers having to store money in multiple electronic wallets to pay for services such as cab rides, movie tickets or utility bills.

    The digital wallet companies say UPI will make it easier for consumers to load cash onto the wallet and at the same time, do not expect the move to impact their business, especially in the short term. “UPI will bring easier and cost effective methods to load money in Paytm,” said Vijay Shekhar Sharma, CEO, Paytm. UPI is a layer of architecture built on top of standards like the Immediate Payment Service (IMPS) platform, which enables transactions using unique identification and mobile phone number without sharing any other bank details.

    The ease-of-use this technology offers is expected to transform the way Indians make digital payments. So much so, that India’s top online retailer Flipkart, recently acquired UPIbased payments company PhonePe earlier this month. Announcing the acquisition, Binny Bansal, CEO of Flipkart, said slow adoption of digital payments has been one of the biggest hurdles for mass adoption of online shopping in India. “UPI has the potential of transforming the entire payments ecosystem in the country,” Bansal said in a statement.

    UPI also eliminates the need to exchange sensitive information such as bank account numbers, and entering numerous account/card details and multi-level intervention, during a financial transaction. Wallet companies expect this simplified interface to offer clear benefits for them to build new services. “As UPI comes into being we are confident that on the rails of UPI, we will be able to enable a faster and more secure transaction across merchants,” said Govind Rajan, CEO of FreeCharge.

    Experts, however, argue that once widely accepted across the banking sector, UPI could potentially challenge the business model of mobile wallets including PayTm, FreeCharge and Mobikwik, which have flourished because of the convenience they offer. Vivek Belgavi, leader, financial service technology, PwC India, is of the view that a lot of mobile wallet players were trying to make the process easy, an advantage which will go away.

    “This is why all the wallet companies have moved on to focus on use case story (acquiring merchants) and making life easier,” he said . Wallet companies disagree. “In the short term, UPI has no negative impact on wallets, and if anything, it will make loading money easier,” said Bipin Preet Singh, CEO, Mobikwik. Typically, the widespread use of a new payment instrument happens when everyone in the ecosystem adopts it, especially the consumer. As in the case of credit cards where Visa and Mastercard franchises were pushed through partnerships with banks. 

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