In a major milestone, Unified Payments Interface (UPI) transaction values crossed the $1 trillion mark in FY22. It also commanded a 60 percent share in India’s retail payment volumes for the year.
Since the coronavirus pandemic, the payment mode has broken records every few months. UPI crossed Rs 9 lakh crore in transaction values and 5 billion in volumes for the first time in March. The National Payments Corporation of India (NPCI), which operates UPI, is targeting 1 billion transactions a day in three to five years.
It has two key tasks—enabling UPI on feature phones and in offline mode for smartphones. UPI 123Pay for feature phones is being tested, while NPCI has issued a circular on how UPI Lite will work in offline mode. UPI 123Pay was launched by Reserve Bank of India (RBI) Governor Shaktikanta Das on March 8.
In the first interview by an NPCI official since crossing the $1 trillion milestone, chief operating officer Praveena Rai told Moneycontrol that onboarding new users through UPI 123Pay will be the next big moment for the payments system. Rai said UPI’s growth momentum will continue unabated in FY23. Edited excerpts:
What was the mood within NPCI after UPI crossed the milestone of $1 trillion in transaction values for FY22?
It is very fulfilling and it is important that we never take it for granted. The beauty of this milestone is that many things need to come together -- the entire ecosystem, the efforts of the banks, the efforts of the apps to support the functionality, use case and demand. And then, of course, users really taking to it.
During the pandemic, we felt that people were becoming more accustomed to digital. But there was always a sense of whether people would stay or go back to other ways, as they might have done two to three years back. The good news is that once users have tried UPI, they love it and stay with it. That is what the journey is really all about.
How do you see UPI faring in FY23?
Our volumes doubled this year. I think the growth curve will continue, as in if we get the plans right, the plans that we are now talking about. There’s no reason for the growth to slacken in any way. The growth should continue with that momentum.
What are the next big milestones for UPI, considering that the transaction numbers have not slowed down?
We believe that UPI 123Pay is going to be a very significant action on UPI because it really moves into an addressable segment that has not been accessible to UPI. UPI has also not been accessible to people without a smartphone. So that was on our radar…
Early results are looking good. We’re already seeing users on board, we are seeing numbers come in and it has been enabled on multiple modes. It could be something as simple as an IVR (interactive voice response) transaction. There is also a solution which is a light app that can be installed on a feature phone. It could also function on a missed call model, or it could be proximity based. The kind of innovation that will happen around these options will determine which of them will succeed, how they will succeed, in what situation they will succeed. It will take the next two to four years, but we think this is going to be the next big thing.
We have also seen very interesting use-cases come out for UPI 123Pay. Gas booking has become very popular through the mode. We look at how we can provide more opportunities to use UPI for users.
Secondly, how do we take UPI to new users? Aadhaar-based onboarding is something that you will see more of this year. UPI onboarding requires a debit card and that onboarding process is not as simple as Aadhaar, which will help to bring more users into UPI.
Our big focus for FY22 was UPI Autopay. That has really worked very well, we are very satisfied with where that is. We are adding over 5 million mandates every month with a very strong base of active mandates. Every month it is expanding into new categories.
And I’m most excited about the online dispute resolution UPI Help. We want to extend the UPI payment experience into the post-payment experience.
Any numbers from UPI 123Pay trials? Are people using UPI 123Pay for person-to-merchant payments or for person-to-person payments?
Currently, we are seeing more P2M. It is too early to talk of numbers because the launch happened, but market enablement is still in process. Once users start getting comfortable, you need to reach a certain threshold where there is an inflection point and then the word-of-mouth effect starts kicking in. The first year is usually really about getting the early cohort of users who want to try something new, getting feedback from them, making the requisite iterative feedback back into the processes and the user journey for this to be very successful. But we are very confident about it.
NPCI has informed banks how UPI Lite will work in offline mode and that it will be implemented in two phases. What more has happened?
We have issued the circular that will support the pilot. A lot will depend on how it works out beyond, but we are very excited about what we are solving from it. It is two very important things – one is the customer experience. All of us have very long bank statements with a number of UPI transactions. I am looking forward to my bank statements getting back to its early thin days.
The user experience also in situations and places where signal quality is not too good, so this should solve for that.
The second is the bank side. Not having to go back to the main banking platform (for every transaction) will make this efficient and faster. The pilot will happen and subsequent to that, we will gauge the results. So, it’s very early days to start talking about it.
We have had multiple instances of downtime. With volumes growing, what is the conversation between banks and NPCI on reducing such instances?
Significant work has happened. In fact, banks have invested whatever is needed to handle the demand. If you look at supply-demand, the demand has been a runaway success. So the catch-up to that has happened and it’s been pretty smart in the way it’s been done and we’ve been part of those conversations as well. So that’s part one, and part two is UPI Lite.
But except for a one-off maybe year-end kind of challenge, which typically is there in the ecosystem, we have not really had anything very significant.
How do you see FY23 for RuPay on both the credit and debit card sides?
We have got our building blocks in place for RuPay— across debit, prepaid and credit. We have covered the retail and the commercial segment. We look at RuPay as an inclusive card, we are there across all segments of the population. RuPay On-the-Go is going to be very important. It is about experience from a tap-and-go point of view. We are excited about creating user journeys, which are very simple. So people can buy whatever form factor they want, they can enable it to be prepaid or debit or credit.
Yes, UPI will take a large share of the payments market. But there are still enough users who are comfortable using physical payment instruments. And that instrument does not necessarily have to be only in the shape of a card. That is why we wanted to bring a fun element so we have got RuPay in the form of wristwatches, wristbands and even keychains. We have also launched a card for medium, small and micro enterprises with Union Bank. We expect many more banks to go live with it.
Coinbase halted UPI for Indians purchasing cryptocurrencies after NPCI’s statement. Had Coinbase not reached out to NPCI before? Have they reached out to you now to engage further on this?
I think we will leave it with what we have said because the country’s framework around this is a work in progress. So we will not comment further in terms of where that is.
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