Payment gateway aggregator Razorpay has tied up with ICICI Bank, YES Bank and HDFC Bank for payments over the Unified Payments Interface (UPI). With this, all merchants on Razorpay will be able to have UPI as an option in addition to credit and debit cards, net banking and wallets.
It is curious to see Razorpay tying up with multiple banks as CEO Harshil Mathur had told MediaNama that the UPI would eliminate the need for payment gateways to tie up with multiple banks. “When it becomes more mature, instead of having to build 57 bank relationships a gateway has to build right now, it needs to build only one relationship with the UPI. So it will ease our efforts and help out the merchant,” he explained.
Mathur added that the company has tied up with multiple banks as the implementation of the UPI is still in its early stages and that Razorpay would see which bank performs well and have a single relationship with them in the future.
The company says that it is the first payment gateway to integrate the UPI and that it does not require the addition of code to start offering UPI payment options to their customers.
It’s interesting to note that banks are allowed to charge merchants a different fee than P2P payments and right now it is capped at the merchant discount rate (MDR) for debit card transactions. Merchants have to pay 0.75% for transactions less than Rs 2,000 to the banks and 1% for transactions above Rs 2,000.
As such, banks will look at typing up with payment gateway aggregators to get access to smaller merchants. Mathur also added that there is a revenue sharing agreement with banks for getting access to smaller merchants through RazorPay. He said that banks share about 20 basis points per transaction happening on the UPI.
Also worth noting, Dilip Asbe, COO of the NPCI, had said that it is more concerned with person-to-merchant (P2M) payments via the UPI to drive usage. “P2P transactions are not that frequent from a consumer standpoint. It happens once or twice in a month,” he added.
Currently , the company has more than 10,000 merchants which includes Videocon, Nykaa, Zerodha, NestAway, Udacity and Chai Point.
The UPI went live with 21 banks this month. UPI is a payments architecture that will allow users to make a transaction without divulging their account details via aliases (such as shashidhar@hdfcbank) and make pull-based payments. The payments architecture was built upon the IMPS mobile payments system which let customers to transfer money across different banks with the use of a single identification and password.
Other UPI developments
– Earlier this month, YES Bank partnered with 50 companies to build an ecosystem for the UPI. For starters, it has already announced its partnership with Flipkart’s PhonePe. Others in the fold include Capital Float (lending), Ezetap, Benow (merchant aggregators), MyPoolin, Splitkart, Paysay (bill splitting) and Instafeez (fee collections).
– In July, Axis Bank and mobile wallet FreeCharge partnered to allow its users to make payments through the UPI. Through this, FreeCharge users will be allowed to load money into their wallets through the UPI option which will be powered by Axis Bank’s SDK.