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Since its launch in April 2016, the NCPI’s brainchild, Unified Payment Interface (UPI), was designed to play a critical role in digitization of the banking sector.
The industry experts, however, think there is a lot more that can be done with it, especially in terms of UPI becoming a catalyst for smaller lending and repayments functions. There needs to be some more work going into it for sure.
Bala Parthasarathy of MoneyTap, the smaller credit lending brand, says they will, for instance, use UPI integration for repayments by next quarter, on their app. That will be an innovation, as MoneyTap is a unique credit line application for smaller borrowers, available as a mobile app. This should ideally be the step forward for the teeming millions of customers in India for small sizes of credit. Ideally, UPI should be at the forefront with solutions protecting the interests of such small borrowers.
It would appear, though, that UPI is still the domain of banks. “In order to innovate you need bank partnership. A startup cannot do a UPI product on its own. So, what you can do with UPI today is very limited as far as non-banking financial operations are concerned. You can accept payments using UPI and ask you to pay my bill, if you are using Phone Pe which is tied up with ICICI or Google which tied up with HDFC. One of these payment companies need to tie up with bank to be able to accept these UPI payments.”
However, he looks ahead with hope for the development of UPI as a major driver for digital transacting ability for Indian banking customers. “I think that we are at the beginning of the revolution. The way the government always does things is first try it out. Then the steps for innovations are done. So, right now what we are doing is very basic stuff - send you money, get you money. I think there is lot more to be done in it. It is entirely the domain of regulation and advantage for people like us have.”
For MoneyTap, the road is actually not very difficult. “We have deep partnership with bank like RBL one of the premium and relationship with them so to innovate with them is lot easier. In fact, one of the competitive advantages we believe is a fact that we have deep bank partnership with RBL. Ultimately in India everything with money would point to banks sooner or later. If you have good bank partnership, it is the strategic strength,” he adds.
Over a period of time, regulation need to be, and will be created to allow non-banking financial institutions to leverage the power of UPI.
As Parthasarathy says, “We have ideas and technologies available. Technology is not a problem, but regulations do not allow it for good reasons also. It is a whole new paradigm. It is good to iron out the kinks before opening up the regulations as lot of money is involved.”
In any case, UPI 2.0 which is much more technology oriented and market friendly is already adding value to these ideas. The new and upgraded version allows merchants to directly bill customers along with a payment request, and also allow them to link their business accounts to the app. This enables them to add overdraft accounts to the platform. This will also add the credit payment functionality and allow expansion of customer base.
Yes, it will pay to wait, watch, then move ahead.
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