Why UPI-Aadhaar's Execution Brings Government to the Test The increased clamour, hence emerging out of this bold move by the government, has created war hysteria between UPI and existing modes of payments.

After many things that India innovated for the world, though not in modern times, comes Unified Payments Interface (UPI), a made-in-India technology, that stands to disrupt the financial services globally. A technology that India will be exporting and not vice versa - UPI along with Aadhaar could very well destroy business models of how peer-to-peer and peer-to-merchant payments work but with a caveat. The execution, if not seamless, will render it just a poor distant cousin of wallets and legacy system of plastic money.

What UPI apps, launched by banks, third party fintech companies like Trupay and BHIM – the evolved version of the UPI app, started by the government last year, will do for payments is akin to what Android did for applications and telecommunications. It aims to further simplify merchant payment system by integrating users' Aadhaar card details to their bank accounts and using fingerprint that makes smartphone redundant. The increased clamour, hence emerging out of this bold move by the government, has created war hysteria between UPI and existing modes of payments.

"This will impact wallet businesses tremendously. With offers like direct transfer of funds across different bank accounts and no hassles of loading wallets for payments, UPI has potential to be the go-to-interface for cashless payments. Also, it scores over wallets in terms of convenience, reach, and transaction capabilities," says Harshil Mathur, Co-founder and CEO of Razorpay – the online payment platform for e-commerce businesses to accept payments pay via cards, net banking, wallets and UPI as well. YCombinator-backed Razorpay will also be building solutions around Aadhaar-based payments, similar to UPI.

SPOTLIGHTING GOVERNMENT
Wallet players, however, believe that the user experience they offer and the investment required in educating merchants on UPI and Aadhaar, and costs related to acquiring customers for its adoption, fingerprint devices and their distribution will keep wallets ahead of them and banks-led wallets.

"UPI is essentially a backend switch which connects multiple banks and allows funds transfer. It doesn't solve things like how you acquire customers and merchants for UPI and Aadhaar payments and provide best user experience which is more critical for digital payments," says Bipin Preet Singh, Founder and CEO, Mobikwik. "If banks could have provided all that then wallets were not needed," claims Singh.

Jitendra Gupta, Managing Director of Naspers-backed payment gateway company, PayUmoney, and former founder of Citrus Pay (acquired by PayU for $130 million in September 2016) hints towards the structural issue in the way banks operates. "Banks outsource every technology. They hire vendors for the development work who are least bothered to develop a solution," says Gupta.

Importantly, there are doubts about the government's execution in investing capital in on-boarding millions of merchants and going to each one of them to educate them about UPI and Aadhaar, thanks to
their inherent lackadaisical nature of work. For good, public or private companies, banks etc., participating in the payment ecosystem are best suited to do the task.

"There has to be incentives for private parties to build this infrastructure and education otherwise who will invest money into this? Sure government can get few million users by making grand announcements but after that it has to keep improving for users to adopt it," asserts Singh. MobiKwik last year in October
integrated UPI in its platform for users to load MobiKwik wallet. Unless leading merchants adopt UPI, it will be a slow adoption process even though the popularity of UPI is increasing. "BHIM's adoption will depend on merchants' awareness about it. The adoption of aadhar payments will be heavily dependent on biometric readers' distribution, availability and related cost," adds Mathur.

INNOVATING FOR SURVIVAL
To acquire more merchants in "Bharat', MobiKwik is reaching out to them with a lighter version of its app of less than 1 mb size in multiple languages that works without Internet. On the other hand, PayUmoney is adding UPI as an option of payments and is in talks with the government for allowing it to use fingerprinting mechanism for Aadhaar-based payments in the merchants' smartphones. It is likely to roll the service out by March this year.

"Smartphones costing above Rs 10,000 have fingerprint reading capability. Attaching another device for fingerprint reading is very cumbersome and costly," adds Gupta. It is likely to roll the service out by March this year. "Smartphones costing above Rs 10,000 have fingerprint reading capability. Attaching another device for fingerprint reading is very cumbersome and costly," adds Gupta.

PayUmoney wallet unlike other wallets offer users choice to do so in addition to traditional options of making payment like cards, and net banking. The call, still by wallet and PoS companies is that government must promote a level playing field for all. "Consumers like choices. What if they want to pay via wallets, or debit card or credit card or net banking, etc? Let the market decide who wins," says Abhijit Bose, Co-founder and CEO, Ezetap – PoS solution provider through app and device.

The start-up will be launching UPI option for payments. It will also integrate fingerprint biometric payments. For Aadhaar and UPI to be the de facto way of payments, it is a long way to go even as the early adoption is impressive by looking at BHIM's android downloads. So far there have been mixed responses towards the app's responsiveness while for merchants to accept Aadhaar-based payments, it is yet to actually kick off. It would be more apt if we set a timeline to it for next six months and see if government is really putting money where its mouth is.

(This article was first published in the February issue of Entrepreneur Magazine. To subscribe, click here)