Expect UPI to go full steam ahead in 2-3 months: Experts

Mohndas Pai, Chairman of Manipal Global Education, says it would take a good 3-5 years for people to begin using the payments app, as customer habits die hard.

The fear that banks will lose their relevance once UPI comes into being is a baseless one, feel the experts. The banks will have to create a niche for themselves and develop products like local language use to stay in the game, says Hota. There will always be a section of the customers who will want to go to a bank, says Srinivasan.  On their part, banks will need to have compelling digital offerings to keep the customers from migrating elsewhere, he says.

Similarly, UPI won’t spell the death of other mobile wallets, says Kumar, simply because people will need variety.

The people who are most likely to go for this payments app will be migrant labourers and young people, says Pai.Below is the verbatim transcript of AP Hota, Rajnish Kumar, Shyam Srinivasan & Mohndas Pai\\'s interview with Latha Venkatesh on CNBC-TV18.Q: The platform is ready but when will I first be able to pay my electricity bill using your application (app)?Hota: I suppose it is about two months away. We have just launched it with 19 banks; 29 banks have evinced interest, so the rest of the banks would also get operational soon. Our next target would be the rest of the Immediate Payment Service (IMPS) banks means about 70-80 more banks. So we are creating a big network whereby people can do immediate send and receive. We are in the process of building the infra.Q: I guess a lot of things have to come from the bank\\'s end. You first have to launch an App and then all your customers will have to click on it and register themselves with a unique ID. In your estimate by when will the top one lakh customers of SBI come on to UPI?Kumar: Our IT team is very much on the job and working on this initiative which has been taken by Reserve Bank of India (RBI) and National Payments Corporation of India (NPCI). However, Mr. Hota mentioned about timeline of two months. We should be able to adhere to that. However, about your question on one lakh customers, actually Unified Payment Interface (UPI) is different in the sense that for using this facility you don\\'t have to be the customer of SBI. It could be anyone who can register as a user without being my customer and that is true for any other bank also. Similarly anybody who is either remitting or receiving the money, they don\\'t have to necessarily be a customer of that bank. So to clarify a bit more, suppose you do not have an account with SBI but still you want to use my application which is linked to UPI, you will be able to do it.Q: In that case making it more direct, when can I pay my electricity bill on the UPI. Will that happen in two months?A: Yes, maybe early also but most certainly within two months. There are two parts to it, others have explained but just to expand, the registration like everybody pointed out, is any bank and you could do that and just download the app. The crucial part is Federal Bank or SBI etc, we act as both the issuer and the receiver and the app is neutral to who the issuer is. So once you have Federal Bank or SBI or any other bank app on your phone then you will be able to transfer money and receive money and the unique part is that you can send and collect. So that is not an issue but between 35 and 40 days it\\'s very much possible. All banks naturally will focus on their existing client base to activate and we look at default activation so that the opportunity to get started is very early and the customers who have adopted are people who are savvy with mobile banking already. In our case 8-9 lakh customers are already active mobile banking users, so they will be the first one to adopt and we will probably give them a very easy default address which they can either use or change. Q: Let us assume for argument sake that there is an xyz bank which is traditional, which has not yet put an app on its website but if I as a customer of that xyz bank go to SBI app or Federal Bank app and register myself, connect my unique ID to the account in that bank. So even without any cooperation from my bank I am on the UPI?Hota: Not possible. Both the banks have to be part of UPI then only your account can be used on the app of another bank. Currently what has happened is the 19 banks are ready, their apps are ready. The apps are undergoing the security testing and auditing and we would like to see that they are fully audited and then only the applications will be placed on the Play Store or Apple Store and it would be available for the public.Q: Most of my colleagues do have some wallet or the other with us and we largely pay for our taxis, for Ola’s and Uber’s from our wallet. By when do you think we can make simple payments to each other on our UPI by simply sending a text? For instance if we were jointly to go for a treat and we want to split the money or pay each other, by when can we do it on the UPI? Will that be possible within two months, six months? Srinivasan: These are all part of the phase I, what you are talking about. So, very much yes, within two months this is possible, only caveat being what AP Hota pointed out that the taxi driver or the restaurant where you want to split your bill should have the registration with one bank and my guess is that all the large banks today are very actively on this. So I don’t see this not happening. Everybody would have done it. If by any chance that one hotel or restaurant or taxi driver is not, they will catch up very soon. So, if not two, it would be three months but very likely that this whole phase I activities should happen. What will be the exciting part there on is how people, different banks, different institutions build offerings on top of that platform which will be that much more value adding. However, from what you described person-to-person or person-to-entity is almost like a par for the course at the beginning. Q: Do you think now wallets are not needed? You have a Buddy, ICICI has its Pocket and HDFC Bank has its Chillr. Now, that will just get phased out you think? Rajnish: I don’t think that would be the right conclusion to draw because in the market always there are many products and services available and sometimes certain distinct features are built around those products. So, one is for sure, whatever is the most convenient way of payment and whatever customers find that this is the best way to pay, they will use that. However, maybe there are, as you can build around certain cashbacks, discounts, make your product more attractive, so, there will be some USPs for each of the products. However, what we are seeing is now that like universally or globally that gradually the plastic, the paper and the cash, they are on their way out. Q: The payment bank now will have to find a different reason to exists, isn\\'t it? Doesn’t the payment bank find itself into serious competition because of the UPI? Srinivasan: Many occasions we have spoken about both the existence or the demise of the wallet and the relevance of payment banks. Like the earlier participants mentioned, co-existence is a must but I very firmly believe co-existence won’t be a point in time, beyond a point in time there will be a natural fall off of some and they will re-invent in some other form, whether it is a payment bank or a wallet company. The payment banks in particular, I think their principle focus is a low cost alternative and looking at the lower tickets. This beautifully addresses that space, so, the issue is going to be who can execute because the same option of payment bank capabilities exists with banks like ourselves or any of the larger banks too. So, I am not sure payment banks can win just on this count, they need to come up with some materially differentiated proposition and come up with something which makes the customers see this. That is what I mentioned right up front, that what you build on top of it, it was RTGS, it was NEFT, IMPS, now it is UPI, on top of this platform who produces some differentiated outlook or differentiated offering will start leading the pack.Q: As an outsider, by when do you think that paying with mobile text messages is going to become as common as swiping a credit card?Pai: I think it will take maybe three to five years. It is not going to be easy because if you see how NEFT came, electronic banking transfer came, it took a bit of time. People had to change their habits, etc. Fortunately for us, mobile banking is already enforced in India, Paytm is pushing the habit of using mobile transfers and wallet. So, it could happen earlier but we should expect three to five years for the impact to be seen and I think it will be tremendous impact. There are certain groups which are going to use it and these are migrant labour because they can make payment and younger people because younger people below the age of 35 are all on mobile and they will use it; take it like a duck to water, college students because whatever pocket money if they have they will do because on top of that you can build in loyalty programs, give them credit for sweet deals and all that. So, this will be an additionality.I think in the next three to five years you will see a lot of small transactions going, the limit is Rs 1 lakh so obviously these are for B2C transactions and I think it will take some time. Q: If all of us are going to transact through the same app, in the same fashion, banks will become commoditised. What can you do differently to attract customers to your bank? Srinivasan: Like I mentioned earlier is everybody is going to come up with one imaginative solution over the other. There are two parts to it. One is the defence and the second is the group. Every bank has at least the banks will be around for 10-20 years have large vested client bases, whether they are active or inactive is another matter. The first thing is to ensure that you are able to defend and protect your existing base. Bank like us, we have over 9 lakh customers just in the Middle East. They are such an important component of our bank and they are not directly impacted by this. So, we have a full strategy to make sure that we can make profound digital offerings to them. So, each customer, each institution will have their own catchments for which first you will have an aggressive plan to defend and grow. Second is the new to category. The new to category will naturally be influenced by two things, one is the level of technology and the certain degree of brand attraction. All banks are certainly going to have very compelling digital offerings and platforms like UPI make the start point a lot better. If you take India versus many of the other countries, the stark difference is the facilities that have come up in the payment system are actually regulatory led in India versus in most of the countries, it is led by private participants. So, then it becomes proprietaril. In our country, the stack that has been developed is all available to all participants which is a great thing from a ecosystem point of view. So, I think the banks that will win or lose, I am not even willing to say lose, banks that will win more or win less are going to be the ones who are aggressively defending their client base and second is coming up is very imaginative digital offerings for this client base. You must remember India is very layered. There is a kind of client profile despite all your offering will want to come to the branch and do it the way that they most comfortable with. You can’t disregard that base. Some of us, ] the television watching, new generation, younger, technologically savvy, will jump into this. Before the whole nation adopts, it could be 20 years because there is such a large fragmented base of clients. So, I would say the winners here are able to serve and serve in different stratified manner. The generation of clients will get very excited by this who are very mobile savvy, largely are signed up to mobile banking. So I would think we will all attack that first. So, I am not willing to say that one would lose or other. I maintain that there would be some causalities in the area of the wallet structure as it is today because that is disinter-mediated. Q: You will be able to offer fixed deposits (FDs) and loan products on the UPI itself or attract your customers through the UPI in any fashion?Srinivasan: What you would do is that let us say I offer on my mobile application an instant FD opening. He doesn’t have money in my account, he will move it from the other bank account because my rates are attractive and so the integration between my mobile application or my internet application and the UPI application that is where the banks will start differentiating and finding unique propositions. Q: Transacting on the unified payments platform is going to throw up a whole lot of data. Have you been approached by startups who can use this with business analytics, have you spoken to any of the startups?Hota: A lot of companies have evinced interest on that to build on the data which will get created. A lot of startup companies, they have started building small different kind of analytics tools which they would like to sell it to different banks. We had run one Hackathon at Bangalore very recently. The response was phenomenal, more than 100 small groups participated in Hackathon and more than 20 such proposals where on building analytical tools for the banks, the tools that they can really provide to banks.Coming to your question that you had put really, which banks would succeed, I think the banks which would really start leveraging the new data that would churn out from this, they might succeed better than others, not by freebies, not by the way currently the wallet companies have been providing but use of analytics and more new experiences. In fact the one experience which the banks have not been offered so far is go in the local language. The service has to be provided in the local language and some niche product would have to be developed for the specific segments; that has also to be done. Q: As an outsider and as an infotech maverick, let your imagination run, five years down the line how will the payments scene look and how will life outside the payments scene change? Pai: Today, if you look at how the B2C economy works, much of the transactions are very small, Rs 25-30. So, people who are at the bottom of the pyramid buy enough for daily consumption. That daily consumption will increase because the cost of doing the transactions comes down dramatically and if you put it along with delivery, in the sense the supply chain efficiencies because we are seeing a huge amount of investment in startups in linking people to markets so you will see that explosion of jobs in that area in delivery. So, I think it is going to have a fantastic impact at the bottom of the pyramid, up to 60-70 percent of the population. The analytics that can be done is to categorise various class of people, young women, middle aged women, elderly women, children and everybody else so that you have means of connecting to buyers at various segments. So, segmental analysis has become very useful and is very clear those who are going to use analytics, those who are going to use big data and those who are going to configure marketing on the basis of this are the ones that are going to be winners. This earlier era of just doing mass marketing and shoot and pray is not going to be successful in future because you will have very rich data to decide.