UPI revolution marches ahead

The reported rush of applicants — 30 already, with 40 days to go before the deadline for applying — for RBI approval to become payment aggregators using Unified Payments Interface (UPI) is welcome. Banks, as regulated entities, need no fresh approval. More competition is welcome. Low entry barriers and the promise of a growing market that is ready to digitise could explain the rush to obtain licences. Right now, UPI payments do not offer any fees to payment aggregators/gateways (PA/PG), expecting them to see as recompense the potential to cross-sell financial services such as loans and insurance. This is not good enough. RBI and the government should create a pool to compensate PAs/PGs, the one from its saving on printing notes and cash handling, and the other from the additional revenue from increased transparency of financial transactions.

The need is also to popularise UPI, a fully open and tokenised payment system, which enables people to transfer money from their accounts instantly and at any time to another account linked to a smartphone. Its world-class open architecture and fully flexible user interface make possible traceable payments, improving security and transparency. India’s digital financial ecosystem is bringing in more merchants, micro, small and medium enterprises (MSMEs), and consumers into its net with attractive services and driving scale. In UPI, India has a system that is arguably the finest in the world, and has the opportunity to export the model to other countries, developed as well as developing.

As with all things digital, the real threat is integrity of software and hardware systems and personnel conduct. RBI and the National Payments Corporation of India must focus attention on systemic integrity and security.