A profound milestone was crossed last in the evolution of India’s digital economy. While there has been much hype over schemes like Digital India and Startup India, this one may be more revolutionary in its reach and impact at the grassroot level.
Let me put in a timeline of questions that define digital culture over the past two decades or so in India to take you there.
•1998 – Do you have email or Hotmail?
•2000 – Are you on Yahoo Messenger?
•2002 - What’s your mobile number?
•2006 – Do you have a Facebook ID?
•2010 - What’s your Twitter handle?
•2014 – You are on WhatsApp, right?
•2018 – Does your bank account have UPI?
RBI governor Raghuram Rajan, in the presence of former Infosys CEO Nandan Nilekani launched the Unified Payments Interface (UPI) to boost digital money transfer linked to Aadhar, the unique identification system championed by Nilekani as founding chairman of the Unique Identification Authority of India (UIDAI). This makes authenticated, safe and confidential transfer of money from multiple bank accounts to anyone on the platform as easy as sending an email from a mobile phone.
If you want it in one line, I would call it a “Visa for the masses” (or a Mastercard or RuPay, if you will). But this one needs no credit or debit card and a heavy-duty bank account. Just an Aadhar number and a basic bank account will do. Hundreds of millions of Indians can do digital money transfers with this. Nilekani informs me that it does not have a brand name yet. This is a pity and I expect the lacuna is rectified soon.
To those confused by brand-named mobile wallets like PayTm Money, Ola Money and Airtel Money, the UPI platform developed by the National Payments Corporation of India should come as a generic standard that clears up confusion.
Cashless transactions have thus far been the preserve of the elites – with only 23 million Indians holding credit cards. Cashless convenience is now a mass product, thanks to UPI. As Srikanth Nadhamuni of Khosla Labs says, it will do to cashless deals what the sachet did for shampoos that used to come only in bottles.
UPI makes instant money transfer easy through a “virtual address,” taking it way beyond the net banking transfers. You can keep the details away from the one you are dealing with. Or you can use an Aadhar number or mobile number instead of the virtual address.
But I am more fascinated by what it could do to macroeconomics.
I remember William Melton, founder CEO of the now-defunct CyberCash, talking about cashless digital deals in a speech in Delhi nearly two decades ago, far ahead of his times. He said a dramatic surge in cash with banks will fan economic growth because more money can be lent, becausee banks link the amount they can lend to the amount of deposits they have.
So far, ten major banks including SBI, ICICI and Punjab National Banks are integrating their mobile apps with the UPI, with an overall 29 already on the path.
The Jan Dhan Yojana has already opened 215 million accounts under the government’s financial inclusion programme, Aadhar already has one billion registered users. The number of smartphone users in India is expected to more than double over the next three years from the current 220 million or so.
The UPI, by building convenience and authentication and connecting bank accounts with Aadhar, puts Prime Minister Narendra Modi’s JAM (Jan-Aadhar-Mobile) scheme on steroids.
“It is a public platform, so anybody can participate. It is not owned by any one company unlike Apple Pay or Android Pay or whatever,” Rajan said later.
That is the point. UPI is not a confusing brandname but an industry standard.
I am still worried about how digital money being branded like soaps through mobile wallets may lead to confusion among ordinary people. But that is another story.