Following multiple delays, the National Payments Corporation of India (NPCI) has finally launched the upgraded version of the Unified Payments Interface (UPI), dubbed UPI 2.0. While most of the features in the updated version were largely expected, the absence of recurring payments is bound to disappoint users and industry players alike.

UPI 2.0 will offer multiple new features like

Overdraft account– Customers can now link their overdraft enabled bank accounts to UPI accounts, which will let them make transactions even if their accounts don’t have the necessary funds. It is important to note that UPI will only serve as a channel or extension of the overdraft account and limits placed by the concerned banks will apply.

Transaction limit– The transaction limit for UPI 2.0 has been doubled from the earlier version of Rs 1 lakh to Rs 2 lakh.

One-time Mandate– This feature would allow customers to block a certain amount of funds from their bank accounts to pay for a product or service prior to availing it. This would help in ensuring that the customer has the necessary funds in their bank accounts at the time of availing the service. The allotted amount will be transferred on the committed date of the transaction. This feature will be useful for booking hotel rooms, airline tickets, booking cab rides, e-commerce deliveries, buying stocks during IPOs and other transactions.

Invoice in Inbox– The new UPI will allow customers to view invoices before they approve a transaction and even receive an invoice when a merchant makes a payment request on UPI. It will help customers to view and verify the credentials and check whether it has come from the right merchant or not.

Signed intent and QR– UPI 2.0 will also offer a secure, and convenient way of paying via the ‘scan & pay’ feature, where customers will have the option to scan the verified QR codes of merchants before making a payment. This will also benefit smaller merchants as users will be notified with information to ascertain whether the merchant is UPI verified or not. Transactions are processed faster as an app passcode is not required in case of signed intent. It also negates the chances of QR tampering.

The second version of the popular payments railroad will initially be offered by the State Bank of India (SBI), HDFC Bank, Axis Bank, ICICI Bank, IDBI Bank, RBL Bank, YES Bank, Kotak Mahindra Bank, IndusInd Bank, Federal Bank and HSBC, according to the NPCI. Many other banks are reportedly in multiple stages of updating the service and will launch soon.

Absence of key features

While the updates are largely welcomed, many industry players have been left disappointed with the exclusion of one particularly longed feature –  standing instruction or automated recurring payments. The feature would have enabled automated recurring payments from the user’s bank account towards various digital services, apart from loan repayments, and mutual fund payments, etc., at specific time intervals, as desired by users through UPI. While the NPCI offered no updates on the feature, reports suggested that the feature did not make it to UPI 2.0 owing to the central bank’s reservations. However, some bankers remained optimistic that the feature would make its way to UPI in the coming months.

Earlier reports also indicated that the NPCI would offer a service that not only allow inward remittances but also provided Non-Resident Indians to send funds quickly to Indian residents via the UPI app. Both these features have also been absent from UPI 2.0.

UPI – The story so far

UPI is a platform that facilitates instant fund transfer between two bank accounts on a mobile platform without requiring details of the beneficiary’s bank account. It also allows users to link multiple bank accounts to a single mobile banking application, through which money can be both received and requested through the same interface. The payments architecture was built upon the IMPS mobile payments system. Both the platforms are operated by the NCPI, which is an umbrella organization for all retail payments, owned by a consortium of banks.

UPI, originally launched in April 2016, has been a massive success in the country with the number of transactions and volumes having recorded a steady growth since launch. While many experts believed that the platform’s momentum would fall after the effects of demonetisation wear out, UPI’s volumes have continued to rise. This was largely attributed to the many incentives, including cashbacks offered by major platforms like Paytm, Google Tez and the Flipkart backed PhonePe.

The total number of transactions in July 2018 were around 20 times higher than in the same month last year, according to data published by the NPCI. The amount transacted increased by 12.3% to Rs 45,845.4 crores over June. The amount transacted in July 2018 was 13 times higher than in the corresponding month last year.

However, the number of transactions on a monthly basis declined in July, only for the second time ever, having fallen for the first time in May. Going forward, many commentators are of the view that UPI numbers may fall again given that the government has withdrawn multiple incentives for both merchants and customers alike for making transactions using the UPI. Further, the NPCI has also asked banks to discontinue Aadhaar-based payments through the UPI and Immediate Payment System (IMPS) channels from 31 August, 2018. That could also have a negative impact on the number of UPI transaction in the coming months.

It is also worth noting that the aforementioned development came after Mobikwik’s co-founder and CEO Bipin Preet Singh criticised BHIM, the government-backed UPI app and its cashback offers. Singh suggested that while the government funded cashback scheme was designed to benefit the entire UPI ecosystem, it only ends up benefiting the BHIM app and its user base.