Move to cashless society to be driven by feature phones: Hota
NPCI is trying to promote the USSD, or *99# service â€” which can be accessed without internet connectivity on both feature phones as well as smartphones â€” more aggressively than the United Payment Interface, which can be accessed only from smartphones with data connectivity.
The humble feature phone, and not the smartphone, holds the key to the transition to a cashless society, says AP Hota, the Chief Executive of National Payments Corporation of India (NPCI).
For that very reason, the NPCI is trying to promote the USSD (Unstructured Supplementary Service Data) — which can be accessed without internet connectivity on both feature phones as well as smartphones — more aggressively than the United Payment Interface (UPI), which can be accessed only from smartphones with data connectivity.
Both USSD and UPI allow a bank customer to transfer funds using a mobile phone. A key difference here is that the amount of fund that can be transferred using USSD is capped at Rs 5,000 per transaction.
Hota said he was expecting a quantum jump in the user base of UPI soon after the demonetisation announcement. And while e-wallets have been claiming huge download figures, Hota says UPI has managed only around 1 lakh downloads in the last three weeks, and reported around 25,000 transactions. It helped e-wallet firms that they were able to spend outsized amounts on publicity; something NPCI cannot hope to match.
“It was thought that everybody having a smartphone will adopt Unified Payments Interface (UPI); but that is not the case; USSD is the mass product,” Hota said in a free-wheeling chat with Moneycontrol.
“While there are 350 million smartphone users, about two-thirds of the country’s citizens still use feature phones and it is, therefore, imperative to use a medium like USSD,” he said.
Using USSD, a customer can access financial services such as a bank account balance and funds transfer by dialing *99# from his/her mobile number registered with the bank. The service, offered across 51 banks, can be accessed round the clock.
Hota said that there are challenges at various levels — both for UPI and USSD — from educating masses to creating awareness to telecom-operator related and bank-related issues. NPCI is proactively working to engage with masses and drive up USSD mobile banking. For example, USSD service will be made available in more regional languages. Currently, it supports 11 languages, including English and Hindi.
Meanwhile, personnel at NPCI are focusing on stabilising the two mobile banking solutions. “NPCI is in a firefighting mode to ensure that error conditions are minimum,” Hota said. He admitted that terminologies used on both platforms are not user-friendly and are befuddling to users. NPCI will simplify UPI and USSD to make cashless transactions easier, he added.
At present, transfer of funds using USSD entails about 6-7 steps and also requires the details of the IFSC code. This could be a stumbling block for those who are not too technology savvy.
The other major challenge is onboarding merchants and traders on to UPI. “We expected a lot of merchants would come on board UPI. For example, Flipkart, which has completed its technical UPI integration, is yet to go live,” Hota said.
Besides, as UPI and USSD are bank-to-bank transfers, banks are not keen on giving away the benefits of well-established features like credit and debit card payments. “Banks don’t want to cannibalise the commission they earn on card payments if they opt for UPI,” Hota said. Card payments incur a fee and banks would lose out on this revenue stream if customer-retailer transactions are carried via UPI.
Another hurdle, Hota said, is merchant/e-tailer tie-ups with banks. For example: Flipkart-owned UPI app PhonePe has a tie-up with Yes Bank and payments are routed through Yes Bank. The bank then becomes ‘acquirer’ of funds, said Hota. Simply put, such tie-ups are an additional layer of banking between bank-to-bank transfers between buyers and merchants. Banks are looking to make most of the wider user base of players like Flipkart and Amazon.
Hota is also cognizant about the rising influence of mobile wallets, especially in view of demonetisation. He says wallets appeal to many people who do not want to expose their entire banking details. And while wallet companies may have been a surge in downloads by new users post demonetisation, he is not sure whether they will be able to make enough money merely by expanding their user base.
“It is more of a valuation game for them,” Hota said, referring to the publicity blitz unleashed by the e-wallet companies.