The Future of Digital Banking lies on UPI

Launched recently, a few months back, based on RBI guidelines, the Unified Payments Interface (UPI) offers an architecture and a set API standards to facilitate online payments more securely. The central UPI platform is developed and managed by the National Payments Corporation of India, which also manages other digital payment mechanisms like retail clearing platforms such as Immediate Payment Service (IMPS), National Automated Clearing House (NACH) and Cheque Truncation System (CTS). The move towards promoting UPI aims to simplify and provide a single interface across all NPCI systems so that they can facilitate seamless data interchange thereby facilitating superior user experiences across stakeholders like customers, service intermediaries and service providers.

UPI will facilitate real-time account-to account electronic transfers initiated, authenticated and authorised through a UPI enabled mobile application, many of which are launched in recent times from organizations like BHIM(NPCI), Flipkart. SBI, ICICI Bank and DBS Bank. The key aspects of UPI are

  • The primary platform for payment initiation, verification, validation and subsequent authorisation is the mobile app. It predominantly is focused on using the internet access of smart phones though there are possibilities to use feature phone based models for payments.
  • A customer can check his/ her recent transactions in connected UPI enabled bank accounts through the mobile app of any UPI-enabled bank. This basically means that a user can use the mobile app of Bank A to access his current / savings account held with Bank A as well as his savings / current accounts held with Banks B & C. However, all the accounts, A, B, C should have the same mobile number associated with the account, which is used in the phone where the UPI app is installed for usage.
  • Payments can be initiated by payer or the receiver. If it is initiated by the receiver, he may generate a request invoice which is sent to the payer, and sent to his / her mobile number. If it is initiated by the payer, it may be directed towards the receiver who needs to confirm the payment post transaction.
  • In addition to the account number and IFSC, payments can be made using Aadhaar number, MMID & mobile Number and the Virtual Payment Address (VPA). The VPA is an alias for an account number and is in the format ‘username@bankname’ where the user name is the id selected by the customer and the bankname is the Bank whose mobile application is being used. So for example, the VPA of customers using the digibank app will be xyz@dbs. In this case, the bank is the payment service provider.
  • UPI enables single-click 2 factor authentication with the device fingerprint being the first factor and the UPI PIN being the second factor. Since it involves a biometric level security, information and financial risk of the person making a transaction is considerably lowered if enabled.
  • In terms of transactions, while it sounds similar to IMPS, but offers more flexibility, using the UPI is not associated with any transaction fee and hence even high frequency small valued transactions are facilitated.

With UPI enabled on the mobile applications like the digibank app, PhonePe app and BHIM app, the customers will be able to meet a lot of the required day to day banking needs. For example, if we pick up digibank  by DBS bank, users may be able to do all of the following:

  1. Register their digibank, other DBS accounts as well as non-DBS accounts on the app and create VPAs for each of these accounts using their mobile phone number.
  2. Make payments from any of the accounts added on the app using the beneficiary’s VPA, phone number or account number & IFSC combined.
  3. Make merchant payments from a DBS/ non-DBS account using the merchant’s VPA or the merchants phone number
  4. You can send or receive money using the payer’s VPA or the payer’s phone number.
  5. Authorize a Collect/ Pull request received from the beneficiary for debiting a DBS/ non-DBS account managed on the digibank app installed in a smart phone
  6. Manage their DBS as well as non-DBS accounts on the app balance enquiry, recent past transaction details and generation and / or change of UPI PIN for authentication / authorization purposes
  7. Seamless interbank inter account monetary transfer among the digiSavings account using any other bank account registered on the digibank app.

As of July 2017, the transaction limit for UPI is currently limited to INR 1 lakh/day by NPCI and the same will be applicable for all accounts on any UPI-enabled application connected to one or more bank accounts in one or more banks which enables UPI based payments.

Now while most of these features are also available in other mobile apps like Bhim (NPCI, GoI), PhonePe (Flipkart), SBI Pay (SBI Bank), Axis Pay (Axis Bank) and EMPower (Canara Bank), what really sets out digibank is the value proposition to the customer in terms of their account management. Some of the highly desirable added benefits of converting or opening digibank account is as follows:

  1. High returns with 7% interest on any amount deposited in the account, as low as Rs.1 The average interest rate of other bank accounts is only 4%.
  2. No minimum balance required for opening the account. This is equivalent to the needs of a current bank account but in a current bank account, the appreciation of deposits is marginal if any. This basically means that the savings amount effectively corrodes away due to inflation.
  3. Zero maintenance fees, and hence no surprise deductions for maintenance.
  4. Unlimited, free ATM withdrawals at any bank ATM, which is a huge differentiator, since most banks not only limit the number of cash withdrawal from their own bank ATMs and generally limit the withdrawals from ATMs of other banks to about 4 transactions per month (with an upper limit of 10,000 INR per transaction in the ATM of other banks) after which a transaction fee is levied.
  5. A lot of lucrative cashbacks and offers, when you shop using this account and the associated cards (debit / credit) and mobile app.

If this sounds exciting, India’s first “Digital only bank” It’s available on the App Store and Play Store for immediate download and usage.