Dear Comrades,
The inauguration on Thursday of the National Payments Corporation of India (NPCI)-initiated Unified Payment Interface (UPI) is a big step forward in financial inclusion and the use of technology to improve quality of life.
The post office can soon shut down its creaky, expensive money order service, which costs the sender 5% of the amount transferred, once the number of participating banks goes up from the present 21 to include all banks, as reported by economictimes.com.
UPI enables people to transfer money from their accounts instantly and at any time to another bank account linked to a smartphone.
It will bring down the use of cash, simplify merchant payments, lower costs and improve security and transparency. UPI’s open architecture and fully flexible user interface are welcome.
The technology requires just a virtual handle for instant peer-to-peer payments and, hence, enables anyone with a bank account and a phone to transfer money to another bank account without having to know or enter that person’s bank account number or IFSCcode.
Several bank accounts can also be linked to the same virtual address. It allows merchandise to be paid for directly from the customer’s account to the merchant’s, without cash and without even a payment card.
Transaction charges also hold the key for its wider adoption. At present, the upper limit per UPI transaction is Rs 1 lakh, whereas prepaid wallets cannot do more than Rs 10,000 worth of transactions without know-your-customer (KYC) norms in a given month.
While there is reportedly no cap on how much the sender bank can charge for a single transaction, it is mandated to pay 50 paise for every transaction to the NPCI and a minimum of Rs 1 to a maximum of Rs 5 to the bank of the receiver.
Rationalisation of transaction charges that include interchange fees will be useful to popularise UPI as a fund transfer and payment option.
Will India’s rural masses be able to use UPI? They will need a smartphone and data connectivity. The price of either depends on policy, skewed towards expensive, as of now. The young, the majority, will manage fine. The rest will have to muddle through with cash.
