Digital payments are really important right now. PhonePe, Google pay, paytm and so on have completely changed the way people interact with their money. Smartphones with UPI apps have replaced the traditional wallets. All these have taken place mainly because of two reasons where one is the demonetization and the other is the announcement of reliance Jio’s free data service.
UPI stands for Unified Payment Interface which was developed by NPCI National Payment Corporation of India which is a non-profitable company. NPCI has developed UPI so that people can transfer money using mobile numbers with a limit of Rs 1 lakh. NPCI provides UPI for free.
The use of UPI has swiped off during the pandemic. A lot of small businesses were encouraged during the period where the payment became quick and easy for the merchants as well as the customers. According to NITI Aayog, the payments through mobile are expected to grow to$190 billion approximately in the next three years.
- UPI is kind of a big deal because it will support automated debits via the UPI Mandate feature .This is a significant release because it will allow Indian businesses to now ideally debit their clients on regular fixed payment cycles. Setting-up Bank Mandates for monthly utility payments was energy and time consuming for both businesses and consumers. It imposes physical paper-work and often takes several days by banks to execute.
- Due to this friction in payments most internet businesses like online music players are unable to charge their users directly for the content they consume. Instead they must depend on advertisements to generate revenue, leading to unpredictable cash flows, and inferior, ad-filled product experiences for consumers.
There are two advantages of using UPI over traditional banks for remittances. The first is a better experience for sending money because UPI only requires only 1 payment address instead of 2 the account number and IFSC code. The other is a better experience of receiving funds in UPI mobile applications than traditional Banking applications.
“Unified Payments Interface (UPI), India has created something ‘truly special’, which will open up a world of opportunities for micro and small businesses that are the backbone of the Indian economy”. – Says Mark Zuckerburg
The expectations of small businesses from UPI in the future are:
1: Recurring Payments:
Not unlike Credit Cards, businesses expect UPI to have a one-time authorization mechanism that could deduct money from customer’s bank account at regular periods (best suited for a subscription model – Netflix, HotStar, Amazon Prime, etc.).
2: Remove Transaction Limits:
NPCI launched a UPI category – P2PM. That is any small businesses on-boarded in this category is allowed free transactions up to Rs.50, 000. This was an action to promote small merchants who are yet to join any digital payments platform. For future transactions, small business merchants expect a lift in the transaction cap. For businesses that transact in huge amounts, the limit could pose a challenge.
The business opportunity is not only national in scope. Rather, it is global. The NCPI is setting up to take UPI to other countries, beginning with Singapore and the United Arab Emirates. This helps for the payment solutions to Indians travelling abroad.
Conclusion
UPI is a great step ahead making the cashless payments faster, smoother and easier. It is said that the launch of UPI will prove to be a pillar in the transformation of modern India. It is all set to become an efficient substitute to mobile wallets.
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