11 Jan 2017

Rishabh Tripathi

Impact Of UPI On Digital Wallets

India being home to the second largest smartphone user base in the world is poised to thrive towards a healthy , digital economy and the top contributors for this paperless and cashless economy are the various digital options available likes of debit/credit card transactions , net banking and the biggest players of this game the digital wallets.
But the governments recent move on Unified Payment Interface ( UPI ) has created a lot of  hustle around the digital wallets company and their are talks that the UPI will disrupt the business of digital wallets and make them redundant. While what far reaching effects will this have on digital wallets and payment structure in the country is a matter of time but we can surely analyse the situation from a logical viewpoint.

How Will UPI Effect Digital Wallets ?

1. Simple Authorisation interface.

Users will benefit from not having to enter cumbersome details such as card numbers, MMIDs or net banking customer IDs at multiple touch points. Instead, all they need to do is enter their billing details - currently envisioned as a unique virtual payment address for every consumer - to get a billing request on their phone, which they can then accept to complete the transactions. Merchants and retailers, on the other hand, no longer have to worry about investing in costly POS machines and payment.

2. Enhanced Security Aspect Of Digital Payments.

Now one of the main reasons why digital payments and transactions took so long to pick up in India is the users concern over disclosing and entering their confidential financial information over the online transactions such as credit/debit card details etc. With UPI, there remains a two-step verification process, which sharply increases the security of a transaction by upto 25% . However, rather than having an overly complex, and time-consuming process, this new process uses only a verified mobile number accompanied by a mobile PIN. 
3. Banks Backing On UPI.

One of the major feets of the UPI is that its been backed by banks. As of now UPI is being used by 29 banks in India. Now digital wallets can be operational and hold power only when a bank decides to use them . So it could be a total disaster for the digital wallets if the more and more banks decides to use UPI over the digital wallets.

4. Financial Inclusion

Another benefit that UPI has over digital wallets is that it covers more number and greater range of companies, financial entities and organization . Most of the government organizations will surely choose UPI over the digital wallets and this will again be a matter of concern if such a thing happens.


Now time will tell who will be at the receiving end by introduction of UPI . But every coin has two sides. There are some of the concerns over the UPI too that can benefit digital wallets.

Backdrops Of UPI That Can Benefit Digital Wallets. 

First of all bringing about such a change will not be a smooth sailing process. The major challenge lies in transforming customer behaviour. Finding a standardisation across mobile banking platforms and giving customers a seamless experience is going to be key to the success of UPI. Integrating leading banking and other financial institutions with such payments gateways will be tricky and time consuming. 
Another aspect to be included and considered in the UPI framework is of refund.Also UPI service will is available to only those who are in possession of a bank account so now making such a huge population have a bank account and then integrating with the UPI is a daunting task.Given the challenges facing it, the vision of a truly ubiquitous, holistic UPI infrastructure is still some way off from becoming a tangible reality. It will require a truly collaborative effort across banks, payment companies and fintech organisations to make this work. 

Now whatever be the outcome but UPI is a major forward step in digitalising  India and a cashless India. There is no doubt that in coming future with more integration with fintech organisations this step will be a major driver in developing a digitally led business ecosystem.