STARTUP CORNER: Razorpay queues up for a berth on the UPI bus

Chaitanya Gudipatymoneycontrol.comAfter months of wait, Unified Payments Interface (UPI) went live on Thursday with 21 banks opting to join National Payments Corporation of India’s digital payments initiative. While UPI simplifies online cash transactions, experts fear that as the UPI ecosystem thrives, mobile wallets may become redundant. 

They say wallet operators which deal only in peer-to-peer transactions will have to revisit their strategies for survival. 

UPI is a unique payment solution which lets users initiate cash transactions from a smartphone. It provides a ‘virtual payment address’ (which can be a mobile number) for sending and collecting money and works on two-factor authentication. Simply put, a UPI allows bill payments and cash transfers without having to use modes like netbanking, debit/credit cards and payment wallets. Over the next three days, 21 banks including Axis Bank, ICICI Bank, Union Bank of India and YES Bank will make their apps available on Google Play Store. 

Besides banks, a few startups are looking to board the UPI bus. One such aspirant is Razorpay, a payment gateway solution provider, which is in talks with its partner banks for enabling transactions with UPI. 

“UPI will be offered to customers as another payment method in addition to card, netbanking and wallets. Gradually, as UPI matures, instead of having to build 57 bank relationships, that we as a gateway have to build right now, we’ll just need one relationship with the UPI. In this way, it’ll ease our efforts and help out our merchants as well,” Harshil Mathur, Co-founder and Chief Executive Officer, Razorpay, told moneycontrol.com. Currently, Razorpay acts as an interface between customers and merchants transacting online. UPI integration will allow the company to initiate direct bank-to-bank cash transfers between customers and merchants.

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Harshil Mathur

Co-founder & CEO|Razorpay

Razorpay has signed up over 8,000 merchants including the likes of Rentomojo, Papa John’s, Knowlarity, Chai Point, Nestaway and Eatfresh. Apart from credit/debit cards and netbanking, Razorpay supports wallet payments such as Mobikwik and PayZapp. Mathur said that UPI won’t affect big mobile wallet players as they offer a plethora of features other than money transfers. He, however, cautioned: “UPI will not affect mobile wallets to the degree it has been hyped in the media. Since mobile wallets are not in the scope of UPI at all as of now, UPI does not give you wallet interlope as of now. However, if a mobile wallet is only doing P2P transactions, they should probably rethink their business strategy.” 

“Most wallets have features built on top of just being plain vanilla money stores. But, if a wallet is used simply as a means of money transfers, then they may lose their significance,” Mathur added. 

Razorpay is also banking on government initiatives to make UPI an enabler in digital economy.

“The fact that Aadhar-based payments are given an emphasis on UPI shows how closely these efforts are linked together. The upcoming Bharat Bill Payment System also uses UPI, and the government is using all these initiatives in a collective manner to give these platforms a head-start, and we foresee that this will continue in the future,” Mathur said. 

Last month, Rajan Anandan, Vice-President, southeast  Asia and India, Google, had said: “Spurred by smartphone penetration, and supported by progressive regulatory policy, the digital payments industry is at an inflection point and is set to grow 10X by 2020. It says that half of India’s Internet users will use digital payments and that the top 100 million users will drive 70 percent of the GMV (gross merchandise value) — a clear indicator of the growing importance of the digital consumer.” He was speaking at the launch of Digital Payments 2020 — a report by Google and Boston Consulting Group.

Anandan had said that micro-transactions made at outlets like smaller merchants and kirana stores will be key to the country’s digital economy. 

“UPI will enable transfers up to INR 1 lakh that will help small merchants receive payments from across Indian geographies. Instead of having to sign up with so many different wallets and mobile payment companies, small-time retailers can use UPI for faster, immediate payments,” Mathur said.The government began a pilot for UPI transactions on April 11 to test and rule out any glitches in the payments system.