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Building a Global Payment Solution

How UPI could be a global model, driven by NPCI

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Geeta, a 50-year-old mother stays with her family in Mumbai. Prior to the lockdown, she was primarily using cash for her day-to-day purchases. During the lockdown, she registered on UPI for the first time. Now, she uses UPI for her monthly bill payments, orders groceries & medicines, makes money transfer to her staff, and to get that favourite kurti for her daughter from an e-commerce retailer. All this, with instant payment confirmation, and, within the comfort and safety of her home. On occasions, where she has to step out, she uses UPI QR scan & pay with minimal touchpoints. For millions like Geeta, amid the pandemic when social distancing is the most critical norm, UPI has become a boon for their families.

India's diverse market with varied demography poses a challenge and an opportunity for a payment product. Bridging user segments, within five years of launch, UPI has clocked 2.7 billion transactions valued at Rs 5 trillion per month and acquired a significant user base. NPCI-PRICE research 2020 shows that a third of households use digital payments. This journey of exponential growth would not have been possible without the collaborative support of 220 participatory banks, Fin-tech apps, progressive regulations and a steadfast policy framework.

With its XML messaging and API-based technical architecture, UPI possesses scalability at a low-cost. It offers ease of integration for banks, non-banking financial institutions, and Fintechs. The low-cost, asset-lite UPI QR-based acceptance has brought in millions of merchants, large and small into its fold. It is also fully interoperable. i.e. a customer of any bank/app can pay to a customer of any other bank/app.

Interoperability based on UPI's one-of-a-kind four-party model has given the freedom to customers like Geeta, to use any app of her choice to link her bank account and make/receive payments within a few seconds. The UPI ID, with a simplified construct of "geeta@abcbank", acts as her payment address through which she can receive the payment instantly.

The business model also powers innovation at the edges, enabling participants to create and provide a range of solutions to consumers and merchants. This has bolstered P2P, P2M, P2G, P2B, B2B transactions on the UPI platform. UPI can be integrated with merchant apps for the user to have a seamless purchase and payment experience. It has also been approved for IPO subscriptions for retail investors by the Securities and Exchange Board of India, thereby simplifying a lengthy subscription process. With enhancement in features, such as the recent recurring mandate-based payments (UPI AutoPay), the use cases for UPI are only limited by user needs that need to be addressed.

UPI operates as an Instant Payment System. The UPI protocol standard enables the ecosystem to integrate with a multitude of existing banking channels or payment identifiers. Thus, UPI can act as a ubiquitous standard for digital payments. Countries can adopt UPI as a readily available solution to establish their domestic payment needs.

UPI also supports international remittances and the solution architecture can be extended to support the requirements of currency conversion, and other requisite controls. To extend the "best-in-class" UPI payment experience to serve many countries, NPCI International Pvt Ltd (NIPL) has been established. NIPL offers UPI as a standard, as a technology platform or as an entire payment and clearing system.

UPI as a proven, truly instant payment system of scale is well-positioned to be a global standard for instant payments.

(The writer is Chief Operating Officer, NPCI)