The Central government’s flagship Unified Payment Interface (UPI) has not gained enough popularity in the market during the current times of liquidity crunch and it is mobile wallet companies like ItzCash and Paytm that are stealing the march, experts told The Sunday Guardian.

While industry experts have unanimously called UPI a transformative initiative, they pointed out that the lack of awareness among the people, huge dependence on cash due to a wide urban-rural divide, and the “four-party model” of UPI are some challenges that need to be addressed before it makes the most of the current “demonetisation storm”.

“UPI is a great initiative and potential game changer. It offers convenience and safety, two things that are essential for any payment network to gain market trust. However, the communication or awareness bit has to be accelerated to rope in more players. UPI will succeed only when all the players are registered on it,” Ashutosh Kumar, regional head, transaction banking, South Asia at Standard Chartered Bank told The Sunday Guardian.


The UPI is a payment system that promises seamless money transactions between bank A and bank B without asking for card details, IFSC code, or net banking passwords. The user can download the UPI application from the Google Play Store (it’s not present for iOS users yet) and create a virtual address and register one’s bank account.

The user can directly pay to merchants or service providers by simply entering the virtual address of the beneficiary, provided the latter is registered on UPI as well. The initial transaction limit is Rs 1 lakh, which might be increased depending on the learning from the pilot phase. Many banks have already rolled out their UPI apps. However, a user can also use another bank’s UPI app, if their bank has not enabled it yet, and link it with his/her working bank account.

For example, if A has to pay B through internet banking, then A needs to know all the bank details of B. However, as UPI works on virtual payment address, all that is needed for A to make the transaction is the virtual payment address of B.

The platform also facilitates hassle free money collection. The UPI user can send a payment collection request, which will reflect on the UPI app of the person from whom the collection is to be made. Once the paying party accepts the request, money is directly transferred.

“It’s a very seamless experience. Your virtual pay address becomes like your P.O. box. Payment happens in real time, without the hassle of remembering IFSC codes, your card details or internet banking passwords. Also, unlike wallets, where you can just pay in, UPI can both pay and receive and collect money as well,” explained Ashutosh.

UPI is a payment system that promises seamless money transactions between Bank A and Bank B without asking for card details, IFSC code, or net banking passwords. 


While as many as 30 banks have recently joined the UPI bandwagon, big banks like the State Bank of India, HDFC and Bank of Baroda were reluctant to be a part of the mobile-based payments architecture in the initial phase.

“It’s a transformative effort and we all want to be a part of the Prime Minister’s vision of Digital India. However, we had certain reservations regarding the onboarding process and the redressal of failed transactions, due to which our coming on board was delayed,” Manju Aggarwal, SBI Deputy MD, told this newspaper.

Aggarwal further pointed out that the four-party model of UPI, where the user can link Bank A’s account to UPI using Bank B’s application, is one of the major challenges that needs to be addressed. She asserted that seamless transactions and seamless grievance redressal have to go hand in hand for better efficacy.

“If our customer uses another bank’s application to use UPI, then the transaction will be visible to that bank and not me. But in case of transaction failure the customer will approach us as he/she has banking relations with us. This will not only delay the grievance redressal process, but will also make it a rather tedious one. Therefore, we have requested the RBI that in such cases there should be clear regulations on who addresses such complaints,” she added.

Furthermore, a few bankers also see huge dependence on cash due to the wide urban-rural divide as a major challenge to UPI. According to a report by PriceWaterhouse Coopers India, in 2015 as many as 233 million were not formally linked to banking services and mobile payment customers across all the banks in the country stood at 120 million.

Under the condition of anonymity a banker told this correspondent, “The recent move has definitely disrupted the market and has boldly pushed the acceptance of digital banking. But due to the lack of infrastructure and financial literacy among the people, we might see a majority falling back on cash transactions as and when this wave normalises. UPI, wallets, POS machines, etc., are good tools which will come handy only when there is a substantial behavioural change.”


However, many bankers and financial experts have asserted that India is a huge market and over Rs 90 lakh crore electronic transactions compared to around Rs 80 lakh crore paper-based by the end of 2015 fiscal indicate towards progressive future of cashless payment platforms.

The experts believe that National Payments Corporation of India’s UPI might be low on popularity at the moment but the industry sentiments are running high and many have put their bets on it.

“It is as easy as sending a message through WhatsApp. The instantaneous finality of the transactions and the minimum cost on the infrastructure it requires to operate will make it stand out. Give it 10 months and as the number of people using it will increase, its merits will speak. We might overlook it but definitely not ignore it,” added Ashutosh.

Meanwhile, commenting on UPI being a challenge to mobile wallets, Naveen Surya, chairman PCI and MD at ItzCash told The Sunday Guardian, “India is not a homogenous market and that’s its plus point. Our economic ecosystem is expanding and not one shoe is going to fit in. This boost towards cashless economy will see both wallets and UPI growing exponentially.”


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