Following the introduction of unified payments interface (UPI)—that empowers users to initiate payment requests from a smartphone without using credit or debit card and internet banking—by the Reserve Bank of India (RBI), mobile wallet firms have to collaborate with banks to remain relevant and scale up, according to panellists at Techcircle Payments Forum held in Mumbai on Thursday.
"For wallets to remain relevant and for digital payments in India to go forward, a one-size-fits-all approach will not work and collaboration with entities like banks will be crucial," said Raman Khanduja, VP and head of business development at Visa, India. Participating in a session on 'Mobile wallets: Is integration the way forward?', he said, "You have to have the efficiencies of a fintech entity married to the credibility, customer base and capital base of a bank at a much larger scale to be able to compete with cash."
"With UPI, wallets will be part of the back-end processes and will be linked to banks," said Ratna Viswanathan, CEO, Microfinance Institutions Network (MFIN). "You cannot transact on your own. Even Paytm will not be linked to the Paytm payment bank. Though it is part of the same stable, it will not be able to operate," she said.
Wallets are also not a tried and tested model, Viswanathan said. "While some work with bottom-of-the-pyramid agencies and others leveraging services like Uber, not much money is being made; only volumes are being built," she said.
Developed by National Payment Corporation of India (NPCI) and launched by RBI in April, UPI is a payments interface that will enable instant payments on mobile, web and other applications. Once users install the UPI app in their smartphone, it does all the functions of a credit or debit card and internet banking in a more secured environment.
According to the panellists, though UPI will lead to uncertainty for wallets, it will bring about interoperability across payment networks. What this means is that consumers can make payments on a universal interface instead of a single, inclusive platform such as Paytm which would require merchants to have Paytm-operated terminals and consumers, the Paytm app, to carry out a transaction.
"My interpretation of UPI is if you thought your network was going to be proprietary, it is no longer going to be so because UPI allows you to be interoperable which makes it easier for consumers to move in and out of your platform," said Nitin Nayar, Managing Director of Warburg Pincus India Pvt. Ltd.
He said mobile wallets have not been able to build any proprietary network of their own. "Many players entered at the same time; therefore, no single player was able to reach a level of critical mass that allowed it to build proprietary networks," he said.
"UPI has created a level playing field. But the problems many mobile wallet firms are facing existed before UPI came out," Nayar explained.
Many panellists opined that the key competition that wallets and other payment forms face is cash.
"Only 5% of payments of happen on digital. Once NEFT and RTGS are added, this goes up to 8%. So 92% is still cash. Our global experience suggests that for any form of payments to succeed you need three core elements: ubiquity, global scale and security," said Khanduja.
Asutosh Upadhyay, chief product officer at TranServ Pvt. Ltd, said wallets began to be predominantly used for prepaid top-ups as the current systems were not really good. "What you had was an extremely clunky interface to top up your phone or a physical point to try and do that," he said.
According to the panellists, the payments business becomes profitable only when technology comes into play which leads to a reduction in costs. The wallet has to be available wherever the consumer is.
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