#dnaEdit: Unified Payments Interface| Cashless future

The roll-out of mobile apps providing the Unified Payments Interface (UPI) system by 21 banks has further simplified the process of online money transfer between bank accounts and is another significant step towards making India a less-cash, if not cashless, economy. From visiting bank branches for depositing and withdrawing cash and cheques, which also entailed waiting patiently in queues, the increasing penetration of digital networks into every area of human life has made life easier for most, and bewildering for many in the older generation. From credit cards to the development of ATMs to internet and mobile banking to mobile wallets and now the UPI, the hassles of keeping an adequate stock of cash in hand and making fund transfers and bill payments have progressively reduced. The UPI allows bank customers to create a unique virtual address, akin to email-ids, which is all that is required for a person to make a payment into another account. Earlier, customers were required to know the receiving entity’s account number and branch (ifsc) code or their own credit/debit card details at hand to make online payments.

A fact of life in these technological iterations is how they disrupt and render earlier methods obsolete. The arrival of ATMs and internet banking reduced the need for banks to hire tellers. Similarly, the UPI will pose a challenge to mobile wallet companies, and perhaps, even drive them out of business. Mobile wallets have to be recharged with funds from credit/debit cards or bank accounts for making payments. With the UPI-based mobile apps of banks being able to perform the same function, mobile wallet companies will have to innovate. UPI has arrived on the scene just as mobile wallets were becoming popular for small transactions like paying cab fares, booking rail and movie tickets, and other routine purchases. Irrespective of the trajectory that technology will take, the ubiquitous smart-phone is here to stay for a while longer. Much like an illness, accident or calamity, the loss, theft, or damage of a smart-phone now has the potential to throw our lives into a state of disarray. The loss of personal and sensitive data, all of which now tends to be stored on the smart-phone, is traumatic. This is where Aadhaar-enabled smart-phones could provide that extra layer of security through authentication of fingerprint and retina against the biometric information in the Aadhaar database. 

The convenience offered by UPI apps could hasten the progress to a cashless economy and help widen and deepen the tax base. Concurrently, the government would also do well to discourage large volume of cash transactions. The Special Investigation Team on black money has proposed a ban on cash withdrawals greater than Rs3 lakh from bank accounts. There is little doubt that the huge cash withdrawals from banks for election expenditure and real estate deals keeps fanning the black economy. But a totally cashless society is inconceivable yet in a country where the majority of people are low earners, depend on informal credit sources, and buy goods and services in very small quantities. With a low rate of savings, the UPI can become a greater success in India if it is linked to credit card systems and institutional finance. The UPI will give banks more data on customer spending, shopping habits and market trends which it can monetise. With such revenue streams appearing on the horizon, banks have an added incentive to improve their KYC systems, cut transaction charges and discourage customers from withdrawing cash. It is a fitting tribute to technological change that it could achieve the necessary behavioural changes in favour of a cashless economy, where laws and fear of penal action failed.