• Mukund Hari Nathany

The Race to the Payments Pinnacle

Updated: Dec 20, 2020

Mukund Hari Nathany takes a look at the payments landscape of India, a country with one of the most innovative and competitive payments solutions.


When you open the Indian App Store and click on Top Charts under ‘Finance’ – you will find apps of neither a bank, nor a financial institution, and not even a business news app. The top 2 finance apps in the region are actually owned by the world’s most popular search engine and the world’s largest retailer – Google and Walmart, respectively. And the latest to try to join this club is none other than the world’s most popular messaging platform – WhatsApp.


If all that does not sound surprising enough, this definitely will – 4 out of the top 10 apps across all categories in India have payments built into them, and now with the entry of WhatsApp, that number has increased to 5.


So, what is it about the payments landscape in India, that has attracted top corporations and millions of users alike?


Background


2016 was a defining year for payments in India. On 8 November 2016, the 500 and 1000 denomination bank notes were demonetised. In some way, the kind of digital transformation the entire planet has faced in 2020 due to COVID-19, the cash-reliant society in India had already experienced back in 2016.


A street vendor accepting payments through a QR-code based payment service


People of all generations now had to, willingly or unwillingly, embrace this new way of sending and receiving money


A few months before demonetisation, the Unified Payments Interface (UPI) had been launched in India. Online prepaid ‘wallets’ such as Paytm, Mobikwik and Freecharge were already popular, but the ‘unified’ aspect of UPI has made it revolutionary. This means that every single bank account holder across all banks became eligible to make use of this new facility. But what made UPI truly revolutionary – its innovation. For the first time, bank account holders could create something like an email address for any of their bank accounts, called Virtual Payment Address (VPA).


Previously, one would either sign a cheque or type complex account numbers and bank branch codes to make a payment and wait for a long time for their transaction to be processed on a working day. But with this technology, one would only need to type in a VPA like “mukund@xyzbank” on any UPI app on their mobile device and make instant payments, 24x7x365.


The Advent of UPI


All the top-ranked apps mentioned at the beginning of the article have one thing in common – UPI. UPI apps started in the form of standalone apps, with all banks and multiple other companies jumping on the bandwagon. But today, it has also become a significant extended feature of major existing apps like WhatsApp, Truecaller and Amazon.


So be it Google Pay, Walmart’s PhonePe, Amazon Pay or now WhatsApp Payments – all apps with UPI allow users to add bank accounts of any bank, create a Virtual Payment Address and transact with anyone on or off the interface. Some of these apps do not just stop at sending and receiving money – they have utility payments, mobile recharge and many other features built into them. Some others even allow you to book hotels and flights. In the case of Amazon – Amazon Pay UPI lives side-by-side on Amazon’s main shopping app itself. And for the newest entrant WhatsApp, payments are embedded right inside the familiar personal chat.




The Future


When one of the most popular and user-rich messaging apps in the world integrates payments as a feature, the possibilities are endless. While selected users have been testing WhatsApp Payments for several months, it was only publicly launched following approval on 6th November 2020. And despite its public launch, I being a beta tester of the app myself was not able to use the feature until almost a month later on 3rd December. Perhaps it is this gigantic number of native users WhatsApp has, that could have led to its much-delayed payments service still being rolled out in phases.


The National Payments Corporation of India recently put a cap on UPI transactions under which third party applications can process a maximum of 30% of the transaction volumes starting January 2021. This move aims to reduce the cascading impact that transaction failures on any particular app have on the entire system. It might also reduce the dominance of one app over its competitors. But one thing is for sure, money will continue to move, more electronically than ever before.


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