After Prime Minister Modi’s ‘big-bang’ announcement of demonetisation on 8 November, Paytm, a mobile wallet platform, is reported to have added 5 million customers to its fold. This is an unprecedented growth for the company, in just a fortnight.
Incidentally, Chinese e-commerce giant Alibaba holds a large stake in the Vijay Shekhar Sharma-promoted company.
However, Unified Payment Interface (UPI), Paytm’s quasi-government brother, has lagged behind despite being a cost-effective and smart platform. UPI is managed by the National Payment Corporation of India (NPCI).
Big Banks Wanted to Protect Their Digital Turf
In what was termed as a ‘WhatsApp moment’ in the world of digital transactions, UPI went live on 25 August 2015. More than two dozen banks came on board, but the ones with large customer bases such as State Bank of India and HDFC Bank stayed away.
These banks have now woken up to the need to protect their businesses, as a large number of people have adopted private digital wallet platforms such as Paytm in the wake of demonetisation.
SBI and HDFC Bank decided to join the UPI platform this week.
The UPI app facilitates seamless cashless transactions between people with bank accounts in just two seconds. And it does so at little extra cost compared to Paytm, which charges a hefty transaction fee of 4 percent from the merchants.
The big banks, among others, were opposed to joining the inter-operable platform of UPI as each wanted to protect their own turf. They all wanted to have their own apps and believed that mobile and net banking facilities would make them significant players in the digital space.
UPI Was Govt’s Biggest ‘Brahmastra’
UPI was a digital ‘brahmastra’, which was not put to the right use by the government. The frantic pace at which everyone is moving now indicates that all the key players are in firefighting mode, given the breakdown of cash transactions across the country.
Besides daily doses of ad-hoc exemptions, modifications and additions to the cash exchange plan, have a look at the things that have been done to widen the scope of digital cash transactions.
- RBI relaxed limits on e-wallets or PPIs (pre-paid instruments like debit cards).
- TRAI reduced transaction costs for UPI from Rs 1.50 to 50 paise.
- Economic Affairs Secretary Shaktikanta Das announced that there will be no levy charged on all kinds of digital financial transactions such as debit cards until 31 December.
- He also announced that after TRAI action on USSD (Unstructured Supplementary Service Data), telecom companies will waive off the remaining 50 paise as well.
- A committee on digital payment headed by Finance Secretary Ratan P Watal submitted an interim report to the government on Monday.
UPI: An Ignored Opportunity
Bill Gates had termed UPI as the world’s best platform, but the champions of digital transactions in the government were blissfully ignorant of its huge potential.
As the government and the banking system is running for cover, trying to assuage one interest group after the other in the post-demonetisation chaos, here was the opportunity to create a powerful digital infrastructure that ‘Digital India’ promised but not quite delivered.
Or was this indifference deliberate? More so, when it appears that private companies like Paytm are being projected as the poster boys of India’s digital transformation.
Hopefully, a crisis-induced course correction is on the way as the government seems to have woken up to the fact that UPI happens to be smartest and perhaps the cheapest real-time digital transaction platform.
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