The launch of phone-based Unified Payments Interface (UPI) payments marks a major milestone in India’s digital payments journey. Opening up the system to the 400 million people in India who don’t have smartphones will make it a broader and inclusive platform. Since its launch in August 2016, UPI has grown by leaps and bounds. So far, it has clocked trades worth nearly Rs 75 trillion in FY22; the stellar growth has been aided by strong government and regulator pressures, as well as pandemic-induced behavioral changes. As RBI Governor Shaktikanta Das recently said, the Rs 100 trillion marks could be just around the corner. The regulator and the National Payments Corporation of India (NPCI) are both to be applauded for doing an amazing job. The fact that Indians will now be able to transfer money using their preferred missed call device is the result of years of regulatory support and handholding by the NPCI, which is a quasi-regulator for UPI. RBI’s sandbox project for digital retail payments created the perfect conditions for innovations in offline payments. Through hackathons, the NPCI offered fintechs the opportunity to come up with solutions that could be brought to the market. One of the participants in the NPCI hackathons, ToneTag, recently launched voice-enabled UPI payments in partnership with NSDL Payments Bank.

However, the eagerness to implement innovative payment systems appears to be lacking among incumbents, especially banks. When the NPCI was founded, RBI almost had to persuade them to put in capital. Over the past decade, banks have been slower to bring newer payment products to their customers. They only seem to spring into action when a major non-banking player like Paytm or Google threatened to invade their territory with aggressive strategies. The deadline for implementing an NPCI circular on Aadhaar OTP-based UPI customer onboarding is likely to be extended again. Released in September 2021, the circular aims to bring UPI to people who don’t have a debit card or don’t use it too often. The initial deadline for banks, payment service providers and third-party app providers to launch the new product features was December 15, 2021. In December, the NPCI released an addendum, extending the deadline to March 15 “due to delay in readiness”.

The cardless onboarding of UPI customers has long been seen as an important step towards expanding the user base of digital payments. After all, banking and non-banking service providers have themselves been fervent proponents of a transition to cardless on-boarding. The delay in the implementation of the circular is therefore puzzling to say the least. While debit cards were issued to Jan-Dhan account holders at the time of the system’s launch, anecdotal evidence suggests that many cards were later canceled due to the dormancy period. Many rural people, as well as some seniors in semi-urban and urban centers, who do not have a debit card, remain excluded from UPI even after the addition of a feature telephone. In the meantime, RBI needs to accelerate work on the unfinished business of feature phone-based UPI.

The scan-and-pay mode, which has caused much of the jump in UPI transactions during the Covid years, remains excluded from the scope of the latest activation. Launching it as soon as possible would improve UPI’s adoption on storefronts in remote areas. The plan to make feature phone UPI accessible in as many Indian languages ​​as possible should also be accelerated. Otherwise, India’s vaunted digital payment infrastructure risks failing in its role as a public good.

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