Uber’s integration with UPI (United Payments Interface), the NPCI run payment mechanism, has gone live. Hat tip: Avinash D’Souza. Note that rival Ola already has UPI as a payment option

Users can find UPI as a payment option in the ‘Payment’ tab in their Uber app, when they tap on ‘Add Payment Method’. You are then asked to enter your UPI ID (also called virtual payment address or VPA… who names these things?). Uber then charges you Re. 1 to make authenticate your ID (which is then reimbursed). You then get an SMS from your UPI service provider (in my case, PhonePe), and you have to open the app to authenticate the payment separately. Uber’s merchant ID is uber@axisbank, which means that they’re hosting their merchant VPA with Axis Bank.

 

Once the authentication payment is done, your UPI integration is complete.

Note that NPCI is a private entity which is owned by banks. UPI is now also colloquially known has BHIM, which is also a UPI app, which competes with apps from NPCI partners.

UPI vs Paytm

Of course, the problem with UPI (or PhonePe) is that transactions can fail – I’ve had to try a second time with the last two-three UPI transactions that I made, and while that is an inconsequential and inadequate sample size to draw any significant conclusion from, for me, it is very irritating if the failure rate for UPI is that high. Fact is that I had to try a second time in this case too.

The Paytm integration with Uber works smoothly, and this is the big battle now in the payments ecosystem: Paytm versus UPI.

The difference between UPI and Paytm based payments will be that, in case of UPI, I’m guessing that you’ll need to authenticate each transaction using your UPI app, which will involve an SMS based process, which is cumbersome. Each transaction has that little bit of friction built in. In case of Paytm, the friction comes in in the beginning: you’ll need to load your Paytm wallet, following which the payment will be deducted from your wallet automatically, without a need for an authentication each time. The other instance friction in case of Paytm comes in with the fact that that you’ll need to keep a certain minimum amount of money in your wallet to be able to use Uber: from what I remember (from yesterday), it’s Rs 350, which means that you will still need to keep putting money into your Paytm wallet, which will have that second factor of authentication. Because UPI is linked to your bank account, there’s no need for a minimum balance.

Uber and Paytm have history together: At a time when Paytm was largely about recharges, its integration with Uber allowed Paytm to showcase another use case, and brought its wallet a significant amount of credibility among users. This tie-up became necessary after Reserve Bank of India (RBI) issued a directive that Card Not Present (CNP) transactions for purchases of goods and services in India had to be processed through Indian banks, and payments needed to be made in Rupees. Uber’s competitor Meru Cabs had asked Reserve Bank Of India (RBI) to extend its recurring billing guidelines to foreign players like Uber, thereby creating a level playing field among domestic and International players, when it came to billing.

With UPI, Uber can now offer its users another option. The question is, will users switch from using Paytm to using UPI. My guess is that users would still prefer to store money in their wallet, and face that friction of authenticating a transaction once every few weeks, instead of having to face the authentication friction with every transaction.

Updates: updated with Paytm and Uber’s history together, and some context on UPI. Corrected a possibly incorrect assertion related to the Uber VPA