UPI

The Need for CBDC in An Era of UPI and Cash

fsstiprod — Wed, 09 Oct 2024 09:54:57 +0000

The Need for CBDC in An Era of UPI and Cash fsstiprod Wed, 10/09/2024 - 15:24

When it comes to the Central Bank Digital Currency (CBDC) in India, one question that often gets asked is why India needs a CBDC when it already has UPI and of course, cash.

Most people believe that UPI already solves the problems that typically come with cash. And to a large extent, that is true. While cash has been the primary medium of exchange for ages, it does carry a big amount of security risk. Cash is tangible in nature and widely accepted, but carrying cash is risky and susceptible to theft. Another reason why cash works is because it is accepted everywhere; there is literally no person or business that will refuse cash. But cash transactions can be time-consuming and inefficient. Cash also offers a high degree of privacy, but it can also be counterfeited and used for unlawful activities.

When UPI came onto the scene, it was touted to be the next big thing in payments, and it has lived up to that billing. UPI’s popularity and usage sees new highs every month, which is largely because of its speed, ease-of-use and interoperability. UPI transactions are instantaneous, it doesn’t require anything more than your smartphone and mobile internet, and it works across banks and apps. UPI also comes with a bunch of additional features. But the but here is that UPI is dependent on the internet and smartphone penetration in India is still low. UPI also puts the user at the risk of cyberattacks, frauds and scams, which we all know are becoming highly sophisticated.

So, as we’ve seen, both cash and UPI have their positives but also come with their own set of negatives. Can CBDC come in here and become the one answer to all of these problems?

The case for CBDC in India

India’s CBDC – the e-Rupee or e₹ - is said to be a game-changer for the financial and payments ecosystem in many ways. One of the biggest benefits of the e₹ is its ability to improve financial inclusion by catering to the unbanked population in rural parts of the country. The transaction costs of CBDC are said to be lower as compared to UPI, which would help low-income people to access financial services more easily.

CBDC also brings in better transparency and efficiency. When it comes to UPI transactions, many people don’t realise that the settlements are not instant, especially for person-to-merchant (P2M) transactions. Merchants usually receive settlements in batches throughout the day. e₹ transactions, on the other hand, are almost instant and therefore, lower the settlement timeframes in a big way. CBDC, like UPI, also allows transactions to be tracked and audited, which helps improve transparency and reduce fraud.

When it comes to hackers, one advantage that CBDC holds over UPI is that the financial loss can be less. When a UPI account is hacked, the perpetrators gain access to the UPI user’s entire bank account. However, in case of e₹, only the CBDC wallet and the money in it at that time will be vulnerable. This means that if a CBDC account is hacked, the hackers can withdraw money only from the wallet, not from the linked bank account.

If the e₹ can potentially reach a larger base of our population, it can let the RBI carry out more focused monetary policies to enhance the state of the economy. CBDC can also help lower the dependency on conventional banking systems. For cross-border payments as well, CBDC can facilitate faster and cheaper transactions along with lower costs and delays. This can potentially give a lift to the country’s commerce and investments by facilitating smooth worldwide transactions.

Difficulties and food for thought

It is true without doubt that the e-Rupee offers several advantages to the Indian ecosystem. But getting CBDC up and running to match the reach of cash and UPI will not be without difficulties.

Developing and presenting a strong CBDC infrastructure calls for large technological and financial commitments. So far, we’ve seen that the Reserve Bank of India (RBI) is fully invested in making both the retail and wholesale segments of the CBDC a success. This will have to be continued by them for the foreseeable future, till CBDC becomes mainstream.

One way in which CBDC is similar to UPI is that the transactions can be monitored, which will raise concerns over privacy and issues around surveillance. The regulatory bodies have to ensure that these concerns are addressed adequately and also that strong policies are put into place to make sure CBDC isn’t at risk of cyberattacks and frauds, the like of which we’re seeing with UPI these days.

Overall, including CBDC into India’s current payment system that is dominated by cash and UPI will need careful planning and coordination. Though there are obstacles to be solved, the possible advantages–better financial inclusion, more efficiency, and more openness–make this development exciting.

The UPI Fee Debate: Striking a Balance Between Affordability and Sustainability

fsstiprod — Tue, 24 Sep 2024 08:59:59 +0000

The UPI Fee Debate: Striking a Balance Between Affordability and Sustainability fsstiprod Tue, 09/24/2024 - 14:29

(This article was first published on Inc42.)

A survey report by LocalCircles in March revealed a startling fact: more than 70% users may stop transacting via UPI if there is a fee! The debate over fees for UPI transactions drew everyone’s attention in August 2022 when the Reserve Bank of India (RBI) released a discussion paper proposing a tiered fee structure for UPI payments. However, the proposal was not taken forward and the government said it would not levy any charges since UPI is a ‘digital public good’. Interestingly, the topic rekindled a discussion among industry stakeholders, experts and small UPI players: how to make UPI sustainable?

Let’s look at what UPI does today.

UPI facilitated more than 48 crore transactions per day while the monthly value reached 20.64 lakh crore in July, according to NPCI. The sheer size of UPI – both in terms of volume and value – makes it a strong driver of financial inclusion as it enables millions of Indians from across varied socio-economic strata to make and receive payments.

The number of participating banks on UPI, according to NPCI, has grown to 605 in July. Despite its popularity and widespread use, the UPI ecosystem currently operates with little direct revenue generation from users or merchants. Instead, according to government data shared with an online news portal, Rs 3600 crore was spent between 2021 and 2024 to promote UPI and RuPay.

Considering its growth, digital banking consultants have suggested that introducing fees could ensure UPI's long-term sustainability. The Reserve Bank of India’s (RBI) Payments Vision 2025 also presents a strategic plan designed to enhance India's digital payments ecosystem. A central focus of this vision is the acknowledgment of the costs associated with delivering digital payment services, such as switching fees and interchange fees.

The need to introduce fees for UPI transactions

In the previous RBI proposals aimed to introduce charges for UPI transactions includes the possibility of implementing a tiered fee structure based on different transaction amount bands. This approach could help balance the interests of various stakeholders while ensuring the sustainability of the digital payments ecosystem. One key advantage of UPI for merchants is the relatively low cost of infrastructure required for acceptance. Unlike card-based payment systems, which often necessitate the installation of expensive point-of-sale (POS) terminals, UPI relies on

QR codes. This technology is more affordable and easier to implement, making it accessible to a wider range of merchants, particularly small and medium enterprises.

Comparison with Other Digital Payment Methods

UPI is preferred for its cost-free transactions, unlike other digital payment methods, such as credit and debit cards, which typically charge fees. However, this no-fee structure might limit UPI platforms’ ability to invest in new features, security measures, and customer acquisition. Chief financial officers of international UPI companies suggest that merchants’ fees on UPI transactions encourage investment in the platform by creating a revenue stream to support ongoing development.

Maintaining Competitiveness with Other Payment Methods

Notwithstanding financial inclusion as one of UPI’s key goals, if implemented thoughtfully, fees could also provide resources to expand UPI’s reach and capabilities, benefiting more users. RBI discussion paper suggests that UPI, functioning similarly to other payment systems such as Immediate Payment Service (IMPS), should have a fee structure that reflects its operational costs. The RBI has noted that various stakeholders incur an average cost of around ₹2 per UPI transaction, which could justify the introduction of a tiered charge based on transaction amounts.

There are charges already been levied on Credit lines from UPI, but it should also come up for bank accounts as well, so that everybody gets to have a little bit of share for the value they add in the ecosystem in order to remain competitive. Additionally, a reward system should also be introduced for those customers willing to pay charges, similar to that of Credit Cards. This way UPI will enhance the overall ecosystem alongside supporting financial inclusion. This competition of charges can lead to a "better customer experience," benefiting users through improved services and options.

Market Dynamics: Dominance and Competition

The UPI market is currently dominated by Google Pay and Walmart-owned PhonePe, which account for approximately 80% of transactions. Another major player, Paytm, has seen its UPI transactions drop from 1.4 billion in February to 1.3 billion, partly due to regulatory limitations over claims of non-compliance. This dominance by a few large players poses challenges for small merchants, especially roadside vendors, who might be most affected if a flat Merchant Discount Rate (MDR) structure were introduced. Although a tiered MDR structure based on average monthly volumes is more likely, the concern remains that some vendors might go back to preferring cash transactions. However, introducing fees could encourage smaller businesses to focus on acquiring new customers and competing more effectively with these giants, thereby

leading to a more dynamic and competitive market landscape, benefiting consumers with better choices and services.

Way forward

As the RBI and stakeholders engage in discussions around the introduction of charges for UPI transactions, it's essential to consider the cost advantages that UPI offers to merchants. The debate should also factor in the challenges and the opportunities of sustainability, competition, and user expectations in India’s digital payment ecosystem.

A well-designed tiered fee structure could help maintain the affordability of UPI for merchants while ensuring the financial sustainability of the payment ecosystem. Although experts suggest a minimal fee structure that won't deter users, it's clear that personal/peer-to-peer UPI transactions should remain free to support widespread digital adoption. Finally, finding the right pricing balance will be crucial for UPI's continued growth and its role as a cornerstone for an inclusive global digital economy.

How UPI has Transformed India's Digital Payments Landscape

fsstiprod — Thu, 13 Jun 2024 04:56:45 +0000

How UPI has Transformed India's Digital Payments Landscape fsstiprod Thu, 06/13/2024 - 10:26

It doesn’t need to be said that UPI has revolutionized the way India transacts. Its remarkable rise and application across the country and sections of society have resulted in a level of financial inclusion and convenience that was previously unimagined.

UPI has succeeded as a reality because of its innovative and future-focused features, which continue to evolve and adapt to the needs of Indian consumers and businesses. Let's delve into some of the most groundbreaking aspects of UPI so far.

Real-time simplicity

The core strength of UPI lies in its real-time, 24/7 availability. Gone are the days of waiting for bank transfers to clear or relying on limited business hours. UPI's instantaneity has unlocked a world of possibilities, from seamless bill payments to lightning-fast money transfers between friends, family and businesses.

Interoperability

UPI's interoperable framework allows users to link multiple bank accounts with a single UPI number. This breaks down barriers between different banks, creating a unified payments ecosystem. Unlike traditional wallet systems, UPI directly operates with your bank account as the source and destination for transactions, enhancing security, and minimizing the need for multiple intermediaries.

UPI Lite: Expanding offline reach

UPI Lite is a game-changer, because it enables low-value transactions of up to ₹500 without requiring an OTP. UPI Lite changes the game further with UPI Lite X, particularly for rural India where internet connectivity can be spotty. It enables low-value transactions of up to ₹200 without a live internet connection. Funds get debited and credited later when the user's device goes online. This feature increases accessibility and promotes the adoption of digital payments in remote areas.

UPI 123Pay: Inclusivity for all

UPI 123Pay opens the world of digital payments for feature phone users. This feature allows users to initiate transactions by calling a dedicated IVR number, making payments through feature phones a reality. This initiative bridges the digital divide, empowering a vast population that previously lacked access to smartphone-based payments.

Voice-based payments

The integration of voice recognition and conversational AI is taking UPI to the next level. With voice-based payments, users can transact using simple voice commands in their native languages. This feature is particularly helpful for users with limited digital literacy or those with special needs, making UPI even more inclusive.

Credit Line on UPI: Seamless access to credit

The ability to link overdraft facilities or pre-approved credit lines to UPI introduces a new dimension of financial flexibility. Users can now make purchases even if their current balance is insufficient, with repayment seamlessly handled within the UPI ecosystem. This feature expands credit accessibility and could transform e-commerce and lending practices, particularly for small businesses.

Tap & Pay using NFC

UPI is embracing Near Field Communication (NFC) technology to provide a contactless payment experience. With 'Tap & Pay', users can simply wave their NFC-enabled devices near compatible merchant terminals for lightning-fast and secure payments. This promotes hygiene and convenience, further solidifying UPI's position as a go-to cashless solution.

BillPay Connect: Simplified bill management

BillPay Connect unifies bill payments under a single umbrella, accessible through messaging platforms. This feature allows users to fetch, view, and pay various utility bills, like electricity or mobile recharges, directly within their chat apps. It eliminates the hassle of switching between multiple platforms and streamlines recurring payments, saving users time and effort.

Subscription payments on UPI

This feature is designed for recurring payments or subscription services. Users can pre-authorize a transaction for future deduction from their bank accounts, ensuring timely payments without having to repeatedly initiate the transfer. This offers convenience and peace of mind, especially for customers who don’t have access to credit cards to make recurring payments

Signed intent and QR

UPI 2.0 strengthens security and combats fraud by allowing merchants to generate QR codes with a digital signature. When users scan the code, UPI apps can verify the authenticity of the merchant before initiating the payment. This acts as an additional safeguard, particularly in scenarios where physical QR codes can be tampered with.

Apart from these technical enhancements, UPI 2.0 features also focus on enhancing user experience and driving wider adoption. While UPI apps are continuously improving their design and interface, the addition of regional languages further increases UPI’s reach and makes it accessible to a broader demographic.

UPI revolution on FSS BLAZE™

FSS BLAZE™ is a microservices based payments technology platform that offers seamless growth, uninterrupted performance and effortless integration with modern-day digital banking solutions.

With its innovative features and seamless functionalities, UPI on FSS BLAZE™ helps in not only simplifying transactions but also expands possibilities and uses cases. BLAZE™ comes with a powerful PSP layer connecting the central infrastructure with banking systems.

Learn more about UPI on FSS BLAZE™ here.

UPI's Ascent to Dominance: The Driving Factors

fsstiprod — Wed, 12 Jun 2024 05:06:17 +0000

UPI's Ascent to Dominance: The Driving Factors fsstiprod Wed, 06/12/2024 - 10:36

UPI has radically transformed digital payments in India. But how did it become mainstream and face of digital payments? Well, its unprecedented popularity stems from a confluence of factors that converged to make it the go-to choice for a vast and diverse user base.

Core strengths: Simplicity and speed

User-centric design: UPI's success lies in its user-friendly design and the concept of a Virtual Payment Address (VPA) simplified payments. Instead of cumbersome bank details, users need only remember their unique VPA (like an email address) to transact
Power of QR codes: The integration of QR codes propelled UPI into the mainstream. No more fumbling with cards or cash; a quick scan followed by secure PIN authentication enabled lightning-fast payments in shops and between individuals
24/7 real-time transactions: UPI's round-the-clock, real-time settlement] is a paradigm shift. Users can transfer money instantly, regardless of holidays or bank timings. This was in stark contrast to older systems with limited operating hours

The ecosystem effect

Unifying force: Perhaps UPI's most significant feature is its interoperability. It breaks down barriers between banks. Users can choose their preferred app – whether it's Google Pay, PhonePe, a bank's own app, or others – secure in the knowledge that they can send money to anyone on the UPI network
Minimal costs: UPI's cost-effective infrastructure means minimal or no transaction fees for users. This affordability played a crucial role in its widespread adoption across various income groups

Catalysts for growth

Strategic government support: The Indian government, through NPCI, played a pivotal role in UPI's development and promotion. Strong governmental backing offered credibility and accelerated public trust
Riding the smartphone wave: UPI's mobile-centric design dovetailed perfectly with India's rapidly expanding smartphone market. Its seamless user experience attracted millions of new smartphone users
Demonetization's silver lining: The 2016 demonetization move created a surge in demand for digital payments. UPI's ease of use and accessibility made it the preferred solution
Merchant incentives: To increase adoption amongst merchants, incentives were offered. This snowball effect, where more merchants accepted UPI, in turn attracted more users seeking convenience
Power of partnerships: UPI's strategic integration into numerous e-commerce, bill payment and other service apps made it the backbone of India's digital economy. Users could now make all kinds of payments within the apps they already used

Legacy of UPI

The implications of UPI's popularity reach far beyond convenience:

Unleashing financial inclusion: UPI's simple design made it accessible even to users with limited tech literacy and those with basic feature phones. This proved a boon for India's unbanked and underbanked populations
Empowering small businesses: UPI democratized digital payments for small merchants and vendors. Low fees and easy setup empowered businesses that previously relied heavily on cash
Boosting transparency: Due to the digital nature of UPI transactions, it contributes to greater transparency within the economy, potentially helping curtail cash-based tax avoidance
Fuel for e-commerce: The seamless payment experience offered by UPI accelerated the growth of online shopping and digital services in India, giving consumers greater choice and convenience

UPI: A model for the future

UPI's innovation continues, with developments focused on offline payments and efforts to expand its use even on basic mobile phones. Additionally, the potential for UPI's international adoption hints at a future where its benefits extend beyond India's borders.

UPI is a shining example of how thoughtfully designed technology, coupled with supportive policies, can revolutionize the financial landscape and empower millions.

With FSS BLAZE™, UPI applications can get the jumpstart they need by enabling innovative uses cases and expanding possibilities, transforming the way businesses and consumers interact with payments.

FSS BLAZE™ is a cutting-edge, microservices-based payment platform designed to empower seamless growth, ensure uninterrupted performance, and facilitate effortless integration with the latest digital banking solutions.

BLAZE™ incorporates a robust PSP layer, acting as a bridge between central infrastructure and banking systems, ensuring secure and reliable payment processing.

Learn more about UPI on FSS BLAZE™ here.

Factors that Allow UPI to be Free. But for How Much Longer?

fsstiprod — Fri, 07 Jun 2024 05:27:45 +0000

Factors that Allow UPI to be Free. But for How Much Longer? fsstiprod Fri, 06/07/2024 - 10:57

There is no denying that UPI has dramatically transformed how Indians make payments. Its incredible accessibility, convenience, and most importantly, its free nature for end-users, have propelled it to become the most popular digital payment method in India.

And UPI’s monthly numbers prove this. In May 2024, UPI processed a record 14.4 billion transactions, which was worth ₹20.45 lakh in transaction value. UPI is, without doubt, becoming the go-to payment method of most of us.

But how does UPI function without charging its users? Let's dive into the factors behind this seemingly costless service.

Factors enabling UPI's free structure

Government and NPCI Support: To a great extent, we can attribute the remarkable growth and success of UPI to the backing of the Indian government and the National Payments Corporation of India (NPCI). NPCI, which is a non-profit organization, developed and manages the UPI infrastructure. UPI has been promoted by the government since its inception, recognizing it as a tool for financial inclusion and a cashless economy. Subsidies and incentives have also been key in keeping the platform free for personal transactions
Minimal infrastructure costs: Unlike traditional payment systems, UPI leverages existing banking infrastructure, reducing overheads. It doesn't involve physical card networks or the additional costs associated with managing them. The transactions themselves are processed quickly and efficiently, leading to lower costs for all parties involved
Stakeholder benefits: While free for users, UPI offers a win-win situation for various stakeholders:
- Banks: UPI enhances customer acquisition and engagement. Banks benefit from increased transaction volumes and the valuable data generated from these transactions
- Merchants: UPI offers merchants a more straightforward and cost-effective way to accept payments compared to credit/debit cards. This ease drives widespread adoption among small and medium-sized enterprises
- Payment apps: Apps like Google Pay and PhonePe benefit from increased user adoption and transaction volume, allowing them to monetize through value-added services or partnerships
Focus on mass adoption: Initially, the free model was critical for driving mass adoption of UPI. The absence of fees lowered the barrier to entry, particularly in a price-sensitive market like India. This strategy worked exceptionally well, making UPI a ubiquitous part of daily transactions for millions of Indians

Potential changes and the debate on sustainability

While UPI has enjoyed immense success with its free model, the discussion around its long-term sustainability is ongoing. Here are some key points in the debate:

Costs vs benefits: Proponents of the free model argue that the long-term benefits—financial inclusion, reduced reliance on cash, increased economic activity— outweigh the current costs
Alternative revenue models: Some suggest exploring alternative ways to monetize UPI, such as charging merchants a nominal fee for larger transactions or introducing value-added services for a fee
Balancing Act: Any potential alterations must carefully balance ensuring the continued growth of UPI with maintaining accessibility for the wider population

The road ahead

UPI's growth trajectory is phenomenal, and its influence on India's digital economy is undeniable. Its success is partially owed to its free nature for individual users. While the question of its long-term financial model remains, the key will be to ensure that any future changes don't hamper the accessibility and inclusivity that have made UPI a true game-changer.

While the government's continued commitment to the platform will likely play a significant role in sustaining its current cost structure, ongoing technological advancements could bring down operational costs further, making a free UPI model more viable.

UPI revolution on FSS BLAZE™

FSS BLAZE™ is a microservices based payments technology platform that offers seamless growth, uninterrupted performance and effortless integration with modern-day digital banking solutions.

Learn more about UPI on FSS BLAZE™ here.

UPI Tap & Pay: Ushering in a New Era of Real-time Payments in India

fsstiprod — Thu, 04 Jan 2024 05:58:27 +0000

UPI Tap & Pay: Ushering in a New Era of Real-time Payments in India fsstiprod Thu, 01/04/2024 - 11:28

India's digital payment landscape has witnessed a meteoric rise, and at the heart of this revolution lies the Unified Payments Interface (UPI). 2023, in particular, was a landmark year for UPI in more ways than one. UPI transactions crossed the 100 billion mark in 2023, closing the year at 118 billion. This was a 60% growth as compared to 2022. The value of transactions also grew by 44% in 2023.

There were several new UPI features that were brought to consumers in 2023; a marquee one being UPI Tap & Pay. Introduced in September 2023 at a leading fintech festival, UPI Tap & Pay is a contactless payment method that is poised to transform the way we transact. This feature will take UPI a leap forward by making payments faster, smoother and even more secure.

How does UPI Tap & Pay work?

No more QR codes to scan. If you have an NFC-enabled smartphone and the merchant has a compatible point-of-sale (POS) terminal, then all you need to do is tap your phone on the terminal and your payment goes through instantly through your UPI-linked bank account.

Some of you may already be using Tap & Pay with your credit cards. UPI Tap & Pay will work in a similar manner.

More than just convenience

Sure, UPI Tap & Pay will make digital payments more convenient. We won’t need to fumble with our phones anymore to open an app and scan a QR code. We have to simply tap our smartphone!

This is not only more convenient, but with set limits, also more secure. Currently, UPI Tap & Pay will work for transactions of ₹500 or less at offline stores. For this, the feature leverages UPI Lite, a PIN-less, offline payment mechanism. Beyond ₹500, the familiar UPI PIN provides an extra layer of protection.

What also enhances the security of UPI Tap & Pay is that it utilizes NFC technology, which minimizes the risk of fraudulent transactions. QR codes can be easily manipulated, but NFC technology makes transactions secure.

What is NFC technology

Near Field Communication (NFC) technology is akin to a handshake between two devices. It is a short-range wireless technology that enables two devices to communicate with each other when they’re touched together or brought within a few centimeters of each other.

Apart from contactless payments, NFC is also used for sharing photos, videos or files, connecting devices via Bluetooth using a tap, using a phone as a key, etc. What makes NFC secure is that, unlike unknown QR codes, it uses your very own device to complete a transaction.

UPI Tap & Pay benefits to merchants

Merchants, long burdened with managing cash and handling QR codes, can now enjoy simplified payment acceptance. UPI Tap & Pay requires minimal infrastructure, eliminating the need for QR code scanners and printers. The speed and efficiency of UPI Tap & Pay translates to quicker checkout times, leading to happier customers and improved business productivity.

Furthermore, UPI Tap & Pay empowers businesses by offering a low-cost, hassle-free solution, enabling them to accept digital payments and attract a wider customer base. This financial inclusion aspect aligns perfectly with the vision of a digital India.

The future is in UPI Tap & Pay

Looking ahead, UPI Tap & Pay is expected to evolve, enabling peer-to-peer payments, bill payments, and more. With increasing smartphone penetration and NFC adoption, UPI Tap & Pay is poised to become the de facto payment method in India.

However, UPI Tap & Pay will face some challenges. Ensuring widespread adoption across merchants and user awareness are crucial. Additionally, concerns around data security and potential misuse of NFC technology need to be addressed with robust security protocols and user education.

In conclusion, UPI Tap & Pay represents a significant leap forward in India's digital payment journey. Its focus on convenience, security, and inclusivity holds immense promise for revolutionizing the way we transact. While challenges exist, the potential of UPI Tap & Pay to transform the financial landscape and empower millions is undeniable.

FSS and UPI

FSS UPI solutions for real-time payments equips PSPs with a flexible platform to streamline real-time money movement via the UPI network and offers the extensibility to cater to a variety of use cases – P2P, P2M, P2C and C2P.

The solution’s gateway connects with the central infrastructure to enable instant push/pull payments based on a virtual address, completing real-time authorizations as well as immediate payment clearing and settlement efficiently.

Click here to learn more.

Real-Time Payments - The Driving Force of Modern Developing Economies

fsstsprod — Mon, 03 Jul 2023 09:46:17 +0000

Real-Time Payments - The Driving Force of Modern Developing Economies fsstsprod Mon, 07/03/2023 - 15:16

In today's digital age, real-time payments have become a key driver of economic growth and development, particularly in developing economies. Overtime, clear areas of benefit have emerged that are directly and positively impacted by the successful implementation of real-time payments in a country. Some of those areas are:

Better Resource Allocation through Direct Benefit Transfers:

Real-time payment solutions facilitate direct benefit transfers, enabling governments and organizations to allocate resources more efficiently. In developing economies, this is particularly impactful for social welfare programs, where direct payments to individuals or households ensure that aid reaches the intended recipients without intermediaries. Real-time payments reduce delays, administrative costs, and potential leakage, resulting in more effective resource allocation and improved social development outcomes.

Value-Added Services: Request-to-Pay and More

Real-time payment solutions offer value-added services that enhance the overall transaction experience. One such feature is request-to-pay, which allows businesses or individuals to generate payment requests and send them to customers. This streamlined process eliminates the need for manual invoicing, reduces the risk of errors, and expedites payment collection. Additionally, real-time payments enable businesses to integrate additional services such as loyalty programs, discounts, and personalized offers, further enriching the customer experience and driving business growth.

Accessibility and Convenience:

Real-time payments provide unparalleled accessibility and convenience for individuals and businesses. With instant payment solutions, users can initiate and receive payments anytime, anywhere, through various channels such as mobile apps, online platforms, or even QR codes. This accessibility enables businesses to reach new markets, expand their customer base, and operate seamlessly in an increasingly digital economy. Individuals benefit from the convenience of instant fund transfers, allowing them to settle payments promptly and efficiently.

Improved Financial Management:

Real-time payment solutions empower individuals and businesses with enhanced financial management capabilities. Instant access to transaction history, real-time balance updates, and notifications enable users to have a comprehensive overview of their financial activities. This level of visibility aids in budgeting, cash flow management, and decision-making processes. Real-time payments also provide businesses with valuable insights into customer spending patterns, helping them tailor their products and services to meet customer demands more effectively.

Increased Financial Inclusion:

Real-time payments play a crucial role in promoting financial inclusion, particularly in areas with limited access to traditional banking services. With instant payment solutions, individuals can bypass the need for a physical bank account and transact digitally. Mobile money platforms, powered by real-time payments, have become an effective means of providing financial services to the unbanked and underbanked populations. This inclusion not only empowers individuals but also stimulates economic growth by expanding the consumer base and enabling more people to participate in economic activities.

Simplified Cross-Border Transactions:

Real-time payments simplify and expedite cross-border transactions, promoting international trade and economic cooperation. Traditionally, cross-border payments have been marred by high fees, long settlement periods, and complex processes. Real-time payment solutions, leveraging advanced technologies like blockchain, enable faster, more secure, and cost-effective cross-border transactions. This streamlined process reduces friction in global commerce, facilitates business growth, and strengthens economic ties between nations.

Spurring Economic Growth:

Real-time payments serve as a catalyst for economic growth by facilitating increased consumer spending, business expansion, and entrepreneurship. The speed and convenience of instant payments drive consumer confidence, encouraging higher spending levels. This, in turn, stimulates demand, fuels production, and boosts economic activity. Real-time payments also empower businesses with efficient cash flow management, enabling them to invest in innovation, hire more employees, and contribute to job creation, thus fostering economic development.

There are several examples of developing nations who have been benefited earlier with the successful implementation of real-time payments in their countries.

India, Kenya, Brazil, Ghana, and Mexico are only some of the examples that have launched their own real-time payment interfaces to drive financial inclusion and economic growth.

India's Unified Payments Interface (UPI) revolutionized digital payments
Kenya's M-Pesa transformed mobile money services
Brazil introduced PIX, a real-time payment system, while Ghana launched GhIPSS Instant Pay (GIP) for instant transactions
Mexico's CoDi system enables QR code and mobile phone-based payments

These interfaces have empowered individuals and businesses with convenient and secure payment options, reduced dependence on cash, and accelerated financial inclusion. By embracing real-time payments, these nations are fostering digital transformation, driving economic development, and creating a more inclusive financial ecosystem.

Now South Africa has joined the bandwagon with its PayShap and the country hopes to witness a similar success and growth in the region. Just like any growing economy, speed, scale and security would be the primary drivers of this success.

Did you know - FSS’s Real-time Payments solution is benchmarked to process more than 5000 transactions per second Want to know more, click here.

As a leading B2B payments technology company, we remain committed to leveraging advanced technologies and innovative solutions to empower businesses, individuals, and economies, promote financial inclusion, and contribute to the prosperity and progress of developing economies worldwide. Through the adoption of real-time payment solutions, we can usher in a new era of economic development, digital empowerment, and financial well-being for all.

To know more about FSS Products, write to us at products@fsstech.com.

UPI: What’s New?

fsstiprod — Mon, 19 Jul 2021 08:01:26 +0000

UPI: What’s New? fsstiprod Mon, 07/19/2021 - 13:31

It has been five years now since the launch of UPI. A mobile-based, real-time payments platform, the concept of UPI is very simple – a vision to make payments as easy as sending a message. UPI has now crossed 80 million transactions a day, processing $1.34 Billion in value monthly. Now, over 216 banks have gone live with UPI compared to 153 in April 2020 and 21 in April 2016.

FSS is a leading player in the UPI market and one of the first providers to offer UPI 2.0 services. FSS UPI 2.0 opens an endless world of possibilities, enabling PSPs to build innovative propositions to satisfy a range of customers’ payment needs and generate new business value.

To help PSPs address exponential growth, we have enhanced our platform functionality. FSS Currents is a select picking of features we have developed in the last six months

VoiceIT for Interactive, Engaging Services Experience

Voice-based interfaces enable banks engage their customers in an intelligent, interactive, two-way conversation that traditionally a human banker can do in a banking or contact centre.

India is recording a 270% year-on-year growth in voice searches according to Google, indicative of the potential of leveraging voice to help consumers conduct everyday transactions. As the current pandemic has driven the growth of contact free payment methods, usage of voice assistants in banking and payments is growing.

FSS UPI enables conversational transactions through UPI app, enabling a conversational service experience that improves customer engagement. Customers can activate VoiceIT services using the UPI app. FSS UPI is compatible with leading voice bots and supports a range of financial and non-financial transactions. This includes:

Initate a Collect Request
Manage Accounts
Balance Enquiry
View Transaction History
Raise Service Requests. As an example, issue a card

A comprehensive set of security measures including strong encryption, use of Voice PIN for customer verification and out of band authentication assure transaction integrity.

Click here to watch how VoiceIT works.

Multi-lingual Support for Better Accessibility

Customers prefer to conduct financial transactions in a language they understand. FSS UPI, in addition to English, supports major Indian languages -- Hindi, Gujarati, Oriya, Assamese, Bengali, Kannada, Telugu, Malayalam, Punjabi, Tamil and Marathi, enabling customers to conduct financial transactions in a language with which they are familiar. Customers can set their language preference using the UPI app.

AutoPay Deliver Assured Revenues

Research conducted by Harvard Business School states that a customer retention rate of 5% can boost business by 25%. To drive P2M transactions and to bring repeat customers, FSS UPI supports automatic payments.

With Auto Pay, customers can schedule payments at their convenience. Customers need to provide the following details for auto-debits:

Recurrence type as per business requirements
Recurrence rule
- On
- Before
- After
Amount type
- Fixed
- Maximum (for variable amount mandates)
Validity of the AutoPay Request

The scope of UPI Autopay extends to multiple use cases. This includes:

EMI payments for loans, insurance, mutual funds without missing out due dates
School and college tuition fees easily without the need of setting reminders
Subscription payments
Buy now, pay later in e-commerce shopping
Corporate pay-outs (Payroll)
Business-to-Business payments

Click here to watch how UPI AutoPay works.

Changes in RRN Logic to Accommodate Peak UPI Traffic

When the Internet was founded, IP version 4 (IPv4) was the addressing protocol. But due to its binary nature, it could only accommodate 2^32 = 4.3 billion unique IP Addresses. Very soon the Internet Assigned Numbers Authority (IANA) realized that with a projected growth of up to 15 devices per user, this addressing mechanism was inadequate. They gradually started shifting to IPv6 with 2^128 unique possible combinations. A similar problem is being faced by UPI today.

When a transaction is initiated, a unique Retrieval Reference Number (RRN) is generated by the initiating PSP. The RRN functions as a identifier for the transaction.

The current nomenclature construction is as below:

RRN construct: YDDDHHSSSSSS

where,

Y-Year

DDD-Julian Date

HH-Hour

SSSSSS-STAN Number

Currently the UPI system is designed to support 1 million RRNs every hour. In peak hours, the number of RRNs exceed the hourly cap, resulting in additional reconciliation related overheads.

To address the issue, the current RRN syntax has been revised wherein HH replaces Trace number SS to accommodate 100 million unique RRNs (10^8) in 24 hours from a single Payer /Payee PSP. The new RRN construction is:

RRN construct: YDDDSSSSSSSS

where,

Y - Year

DDD - Julian Date

SSSSSSSS - STAN Number.

This will reduce transaction declines due to duplicate RRNs and also help in reconciliation in case of any dispute. Based on the revised RRN construct, the Payer/Payee PSP will have the capability of generating 76 million additional RRNs from PSP in 24 hours.

Strong Authentication -- Software Security Module

The current use of HSM for key management escalates the overall cost of UPI deployment. FSS UPI has introduced the Software Security Model (SSM) for UPI PIN (or any other authentication method) generation and validation to maintain data integrity. To enhance transaction security and protect user credentials, private keys used for transaction processing and digital signing are stored in a tamper-resistant environment. FSS UPI enables PSPs to configure the UPI PIN generation and validation settings during the initial implementation using the SSM. Based on the configuration, UPI mobile application can initiate the second factor of authentication (UPI PIN) which would be validated by SSM for every transaction to ensure end-to-end security and confidentiality of UPI.

Send Money (On-Us)
Send Money (Off-Us)
Confirm Collect (On-Us)
Confirm Collect (Off-Us)
Debit Transaction (On-Us)
Balance Enquiry (On-Us)
Confirm Mandate (On-Us)
Confirm Mandate (Off-Us)
Change PIN

Way Forward

It is easy to predict the continued growth of real-time payments in India. The maturing of real-time payments adoption presents a major opportunity to accelerate and innovate around digitised customer experiences. To increase market share, PSPs, need to build a wide partner ecosystem and offer innovative verticalized use cases. FSS continues to bring rich digital overlays to help PSPs capture the added value that the market is craving.