Driven by mobile wallets, and more recent innovations including the UPI platform, Indian consumers have embraced the use of mobile payments for day-to-day transactions. And, not surprisingly, the payments space leads this trend. India has seen some amazing shifts in the digitization of payments over the last few months. The number of merchants accepting card payments has more than doubled in the last two years to cross 3 million, and the number of UPI transactions almost touched 250 million in June 2018, according to Euromonitor. When UPI was first launched in 2016, it was rightly heralded as a game changer. Whether it is about payments or transfers, UPI has exceptional benefits.
But for it to become a truly universal payment option, the existing UPI solution needed to be more than a peer-to-peer platform. UPI 2.0 did just that! With the transaction limit doubling, large e-commerce merchants with high-value transactions who had not opted for enabling UPI have now started to show interest in the new payment model. We believe UPI has just scratched the surface and it will go a long way in increasing digital adoption in the business sphere, and for peer-to-merchant transactions.
How will the upgrade affect SMEs?
The UPI upgrade has launched many new features such as an increased transaction limit of `2 lakh. However, it is the ‘for merchant’ features that have started directly impacting P2M transactions.
● Use of overdraft accounts: Before UPI 2.0, UPI payments were made only from savings accounts. But now, with overdraft accounts, merchants are able to withdraw money even when there is a cash-deficit in their account. Business, therefore, does not have to stop just because of a temporary issue of insolvency.
● Capture and hold facility: With this feature, UPI has opened itself up to use for a variety of business verticals. Hotels, e-commerce companies, cab-booking services are able to block amounts on their guests’ credit cards as advance, or against security, and refund the same once the booking is completed. This will also be of use when buying stocks or IPOs and other such transactions.
● Support for invoicing: Invoices, bills, or any other supporting documentation is not a necessity when making a peer-to-peer payment. So far, a merchant could only add a description for the payment asked. The support for invoices in UPI 2.0 means that businesses can use a single platform for sending invoices and receiving payments, instead of using separate mediums for the same.
● Easy resolution of refunds: Another reason why UPI had not permeated deeply into the business sector was that refunds were not a part of the initial core spec. Now, UPI payments will also follow this mapping so that users and merchants can have clarity on the refunds made.
There is no doubt that the added features are opening up UPI to more use cases in the business sector, and allowing for greater permeation. The increased popularity of UPI, as a direct result of these upgrades, will also reduce the market for Wallets in the future. Recent data shows that transactions on prepaid instruments like cards and Wallets have reduced by 14 per cent between March 2017 and March 2018. With UPI, this number is set to reduce further as customers would want to use a platform that allows direct bank transfer of money rather than uploading money into their wallets.
Looking Ahead
Customers prefer simpler, ubiquitous payment solutions that can reduce friction during online transactions. UPI transactions are direct and easier; as compared to loading money into, and withdrawing from, a prepaid instrument. For the new platform to become the leader in digital transactions, it has to offer ubiquity and drive large-scale adoption of digital payments; even in the smaller towns of India where the use of technology is sub-par.