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The National Payments Corporation of India (NPCI) will be launching  a second version of the Unified Payments Interface (UPI) by March 2017 reports Mint. According to the story the UPI 2.0 willL

  • Have pre-authorized transactions through digital signatures and biometric authentication. pre-authorized transactions are particularly interesting at time when recurring payments are being introduced in India.
  • Integrate Aadhaar. Right now, UPI hasn’t got Aadhaar integration, even though the draft paper for the UPI had detailed out that it would be using the Aadhaar to map out financial addresses on the UPI.
  • Integrate Bharat Bill Payments System (BBPS), which will allow customers to make UPI payments. Right now, only netbanking and cards are supported for BBPS.

The NPCI was unavailable for comment today and we will update once we hear from them.

UPI 1.0: What it does

The first version of the UPI gives customers a virtual payment address, and allows inter-operability wherein a banks customer will be able to use the mobile banking services of another bank. For example, if you have a bank account with, say Canara Bank, and you want to use ICICI Bank’s mobile banking services, you can that using ICICI Bank’s mobile app, by creating a virtual address linked to your Canara Bank account. The UPI unbundles the account from the bank. The catch here is that the bank needs to be on the UPI.

At present, both State Bank of India and HDFC Bank are not on the UPI, and their customers cannot create a virtual address. SBI is the country’s largest bank while HDFC Bank has a significant retail presence and is the largest issuer of credit cards in the country.

What’s also very important is that the UPI has not allowed wallets to integrate for payments. However, banks do allow loading of money to wallets using UPI.

What the banks are doing: the push for P2M payments

Dilip Asbe, COO of the NPCI, had told MediaNama 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.

Last month, ICICI Bank also tied up with C2C payments company Instamojo and payment aggregator ftcash for UPI payments. It will be a payment option for Instamojo and ftcash and ICICI Bank will process the transactions. Banks are tying up with payment intermediary companies in an effort to build up a merchant base. For these transactions with merchants, banks are allowed to charge a higher fee as compared to P2P payments.

Typically, there is a revenue sharing agreement with payment companies and banks for UPI transactions for access to their merchant database. In the case of Razorpay, banks pay 20 basis points per transaction.

Image credit: Flickr user Jason Saul under under CC BY 2.0