In-depth: Will RBI's Unified Payments Interface affect mobile wallets?

While some players look upon the Unified Payments Interface as a threat that is likely to make mobile wallets redundant, others say that it would enhance user experience

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In-depth: Will RBI's Unified Payments Interface affect mobile wallets?

While some players look upon the Unified Payments Interface as a threat that is likely to make mobile wallets redundant, others say that it would enhance user experience

Archit Ambekar | Mumbai | May 17, 2016


The last two years have seen a surge in the use of mobile wallets. PayU, Paytm, Mobikwik and even the latest player JioMoney, are striving to make the way consumers transact in today's digital world easy.

The electronic payments market is a mere five per cent of the total transaction market in India. Split into credit cards, debit cards and prepaid instruments, the total electronics payments market is worth Rs 30,000 crore, of which 50 per cent to 55 per cent transactions are from credit cards. Nearly 40 per cent of the total transactions are made with debit cards and the remaining 10 per cent come from all prepaid instruments, which comprise mobile wallets.

Of the little over 100 million users of mobile wallets, only a fraction are active users of mobile wallets. The situation is the same for active credit card and debit card users. Of the 21 million credit card holders, only about 10 million actively use it. Debit cards are used more often to withdraw cash than for merchant payments.

The Reserve Bank of India (RBI) is set to make transactions easier by introducing the Unified Payments Interface (UPI). This interface will allow a user to transfer money to another user in a single step. Money will be transferred to a receiver, by just entering the unique number of the receiver.

UPI will link all bank accounts of a user and makes it easy for him to access his or her money. Mobile wallets are prepaid instruments, so a user has to transfer money from a bank account to the wallet, by either using a credit card or a debit card or via internet banking.

The UPI service could be a possible threat to wallets as they may make them completely redundant. spoke to some experts and some companies that offer mobile wallets. Here is what they had to say:

Saranjeet Singh Saranjeet Singh

According to Saranjeet Singh, Head, Digital Marketing, PayU India, the coming twelve months are going to be very crucial for mobile wallets. “UPI is a system which will enable faster transactions. From the current four-step mobile transactions, UPI will bring it down to one step.” It will simplify transactions between two parties, Singh said.

Singh felt that the UPI would make a mobile wallet redundant. It did, he felt, have the potential to kill wallets. But at the same time, adopting the UPI was also crucial. If people did not adopt the service, they would continue to use wallets and hence the coming twelve months are crucial for the adoption of mobile wallets.

Bipin Preet Singh Bipin Preet Singh

Bipin Preet Singh, CEO and Founder, MobiKwik, said, “UPI works as an excellent backend infrastructure. It's a great initiative. However, certain questions remain unanswered. For example, it's unclear how the frontend would work for the users. Who would design it, tying in the various existing bank interfaces, apps, and properties? Will it be effective? Without delivering a great user-experience, frictionless consumer adoption of UPI is unlikely.”

“Also mobile wallets such as MobiKwik have worked hard to gain the trust of users and retailers,” he went on to say, adding, “Delivering a great user-experience was the key for us. Banks even today find it difficult to get their customers to transact digitally. Users are wary of exposing their bank accounts when making payments online. How would UPI solve that challenge for banks is yet to be understood.”

Sunil Kulkarni Sunil Kulkarni

Sunil Kulkarni, Deputy Managing Director, Oxigen Services is positive about the system as it will enhance the user experience. Cutting the payment from four steps to almost zero steps, UPI will over the current poor experience of internet banking. Kulkarni said, “It will not make wallets redundant, it will only help them grow while giving a better user experience."

Sandeep Ghule Sandeep Ghule

Sandeep Ghule, CFO, Udio too was optimistic about UPI, saying that it would give a boost to the way people transact. “It's a fantastic tool for transaction,” he exclaimed. Ghule, though, did not feel that the UPI would make mobile wallets redundant.

Vivek Bhargava Vivek Bhargava

Giving a digital perspective, Vivek Bhargava, CEO, iProspect India, said, “I don't think that will happen. UPI in essence is a v2.0 of Immediate Payment Service (IMPS) and while it's a great advance in banking and easing it a bit further. The fundamental issue at hand is that UPI works with existing legacy infrastructure. For example, for each bank account you have, a different virtual address is issued. This defeats the purpose of a universal single wallet.”

“Moreover,” he added, “since it's just a payment infrastructure, it again depends on how the bank implements it in their debt banking, mobile banking apps. At the moment it's far faster to send someone money from say a Paytm, than do an IMPS transaction in a banking app. It will be an interesting space to watch out for sure, though. UPI may have a valid use case, but don't think it's geared towards the prepaid youth population who want recharges of Rs 10 to be done in seconds.”