Is UPI a threat to the survival of e-Wallets?

6 Nov 2019 Read 176 Views

Have you been searching for rangoli lately instead of embracing your inner Picasso this Diwali? Were you ‘the responsible kid’ all of a sudden to pay all due bills on time this Diwali?

If not, then you definitely had merrier means to celebrate the festival rather than grabbing the 'Cash back' from Google pay's smart Diwali offer.

Google pay is a mobile-based application, which is facilitating real-time money transfer through UPI.

What is UPI?

We all might have come across or even used it recently. Let's understand it better..

Unified payment interface (UPI) is a unique user ID that a bank uses to accomplish real-time money transactions. The National Payments Corporation of India (NPCI) set up by the Reserve bank of India and the Indian Banks Association backs UPI. It facilitates the transfer of money between bank accounts and interconnectivity through IMPS (Immediate Payments Service), which is much faster than traditional NEFT.

UPI eliminates the need to add beneficiary for transfer of money or the quest to obtain bank account details for processing payments. This not only ensures interoperability and smoothness in the process but also provides higher safety to cyber threats.

To initiate a transaction, all we need are virtual IDs (UPI ID) of the parties involved in payments or transfers. Now we no longer need to ensure that the recipient or sender of money uses a particular e-wallet app or not. We can make payments for all our other application-based services through UPI.

So the question arises that why UPI when we already have e-wallets in the market?

What is the difference between UPI and e-Wallets?

Well, the hero of the UPI is its feature of Interoperability between various Banks wherein transfers and payments made are directly transferred to respective bank accounts instead of getting accumulated in e-wallets. Since the payment is in the bank account itself, customers have a better sense of satisfaction and trust with UPI than e-wallets.

E-wallets lack in this feature where they can't share funds between them, and transfer of funds from e-wallet balance to bank account comes with an asterisk of terms and conditions. For example, balance in Freecharge e-wallet is not transferable to an e-wallet of Paytm, nor can we transfer the cashback earned in bank accounts.

To top it all, there are restrictions for the maintenance of minimum wallet balances and marketing gimmick of cash backs, which again cannot be transferred or used freely.

UPI is an advanced and user-friendly technology that gives already established e-wallets a fierce competition. Let's look at the roots of the rivalry...

The Major Concern

One of the significant issues is consumer behavior and indifference towards E-wallets and UPI; both are through mobile computing and are considered interchangeable. As the experts' comment, "Because they are similar they are cannibalizing each other," which basically means one eats up the other product in due course of time.

While UPI already aces the game due to direct bank transfers, E-wallets faces the major hit due to government regulations of KYC norms. Know your customer was made mandatory for all e-wallets, or users were barred from loading money into wallets or freely use the existing balance.

On the other hand, UPI comes pre-equipped with KYC checks through banks. Consumer's attitude towards updating KYC details and getting it verified was definitely not in favor of e-wallets, causing a major drop in transactions compared to UPI.

So is UPI a threat to the survival of e-wallets? Let's find out..

Well, E-wallets like Paytm have been the savior during demonetization and the biggest game-changer for the financial and banking sector in India. Since then, there are multiple players in market overcrowding and saturating the situation, with the majority of them offering similar services and functions. So unless these companies evolve and add values to their services, their chances of survival and prosperous future are bleak.

Against the subversive attack of UPI, most of them have equipped themselves and linked their wallets with UPI so that they don't lag.

But Whether UPI causes material impairment and damage to e-wallets or the threat to survival has been subsumed is still a burning question.

Till then, try harder for Rangoli and simultaneously enjoy cash backs in e-wallets.

-Sanjana Sharma

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