The rapid development of mobile payment in China has prompted domestic payment giants to successively deploy in overseas emerging payment markets such as South Asia and Southeast Asia. Of these, India ended up with 13500 million people, an average of 7Factors such as a 7% GDP growth rate, the gradual spread of smartphones, and a relatively backward credit card payment system are the countries with the most promising success in replicating China's experience. At the same time, India** has also proposed to build a "non-cash society" based on digital India to cooperate with the two policies of "demonetization" and "tax reform". Among them, the "India Stack" (India Stack) initiative is supported by the Indian ** and ** banks, which is mainly divided into three levels: identity information, payment applications, and data-driven, of which the unified payment interface (UPI) is the core part of the payment application layer. Since its launch in 2016, UPI has rapidly expanded its market share and become an important financial infrastructure in India.
The RBI's 2019 report shows that total digital payments have grown at a CAGR of 61% over the past three years, especially between October 2018 and September 2019, when digital payments accounted for 96% of total non-cash retail payments, with the National Electronic Funds Transfer (NEFT) and Unified Payment Interface (UPI) systems processing 25 eachRs 200 million and 87With transactions of Rs 400 crore, up 20 per cent and 263 per cent year-on-year respectively, digital payments have outpaced other payment methods.
1. Overview and development of UPI
Before introducing UPI, let's take a brief look at India's Retail Electronic Clearing Service (RECS). India's retail payment and settlement system is operated by the National Payments Corporation of India (NPCI), a not-for-profit organization led by the Reserve Bank of India (RBI), India's leading bank. Its operating system mainly includes:
Identity Card Payment Bridge System (APBS). Under the Direct Benefits Transfer (DBT) programme initiated by India**, subsidies and benefits are electronically transferred to the bank accounts of intended beneficiaries using the AADHAAR2 system to achieve the financial inclusion goals of India** and the Reserve Bank of India.
Real Time Payments System (IMPS), an inter-bank instant transfer system for funds between banks in India. Support 7 24-hour central switching, clearing and settlement services for transactions on mobile banking, online banking, ATMs and other platforms.
Identity Card Payment System (AEPS). A bank-led service model that allows any participating bank and its ** bank to complete basic account fund operations such as balance inquiry, cash deposit and withdrawal, fund transfer and ** financial transactions on POS or micro ATM through the use of AADHAR identity verification.
The rupay card is planned to be conceived and launched on March 26, 2012. The objective is to build a domestic, open and multilateral payment system in India.
(1) Introduction to UPI
The Unified Payment Interface (UPI) is based on the Real Time Payment System (IMPS), which integrates the real-time remittance service of multiple retail electronic clearing systems. The interface is regulated by the Reserve Bank of India (RBI) and allows for uninterrupted interbank fund transfers throughout the year. It has the characteristics of instant arrival, 24/7 real-time service, low cost, interoperability, inclusiveness for Internet finance and technology companies, settlement in fiat currency, and circulation of funds in the banking system. One of the most unique interoperability features allows users to operate their accounts with any member bank through UPI3. Compared with the use of IMPS to transfer money, which requires the input of the beneficiary's name, account number, bank account number + financial institution** (IFSC), UPI has a simple interface, and only needs to enter one of the other party's mobile phone number, digital ID number or virtual payment address (VPA)4 to achieve convenience such as transfer (see Figure 1).
(2) Development of UPI
In April 2016, the National Payments Corporation of India (NPCI) launched UPI, and six months later, the high-denomination banknotes of Rs 1,000 and Rs 500 were abolished, leading to a surge in the number of users and transactions for mobile payments. Since UPI users can pay directly to each other's bank cards, the mobile wallet services that previously monopolized the mobile payment market in India are redundant, and there is no direct transfer between different payment platforms, and the advantages of third-party payment platforms have been rapidly weakened, and the number and amount of UPI transactions in India in the 2016-2017 fiscal year were only 17.9 million, 69 billion rupees5, and in the 2017-2018 fiscal year, it has increased to 915.2 billion, 1Rs 1 trillion. At the end of 2017, the Reserve Bank of India (RBI) updated its Guiding Opinions on the Issuance and Operation of Prepaid Payment Instruments6 to stipulate that by the end of June 2018, interoperability between mobile wallets, between mobile wallets and bank accounts, and between multi-purpose prepaid cards and the two payment instruments must be able to be achieved through UPI. In August 2018, the UPI system was upgraded to 2In October, the Reserve Bank of India (RBI) issued the Interoperability Specification for Prepaid Payment Instruments7, which further complements the interoperability requirements, and against this backdrop, the number and value of UPI transactions in the 2018-2019 fiscal year soared to 5353.4 billion, 8With a market share of Rs 77 trillion, it has become the underlying core technology of India's payment platform and interbank transfers, and one of India's most important national financial infrastructures.
2. Comparison of UPI in India and mobile phone number payment in China
(1) Functions and features of UPI
1. The function of UPI.
The function of UPI is mainly reflected in the two modules of "Pull" and "Collect".
In the "Pull" module, Payer A only needs to enter one of the virtual payment address (VPA) of Payee B, mobile phone number, and digital ID (AADHAAR) to "pull" the payment instruction.
Collect module, payee B enters one of the ** number of payer A's digital ID number (AADHAAR) virtual payment address (VPA), and then submits a "collect" request to A (the content can include paying insurance bills, utility bills, airline ticket fees, etc.), and the request is transmitted to A's mobile phone through the UPI APP, A can choose to receive the request and pay, or make an appointment for payment ( For example, postpone payment until two days before the bill is due) or the payment amount (e.g. 10% of the total amount paid upfront).
2. Verification method.
Whether it is "pull" or "collect", two elements of verification are required, one is the verification of the association between the user's mobile phone number and the banking app, and the other is MPIN (mobile banking PIN code) or biometric (such as fingerprint recognition) verification.
3、upi2.0。
August 2018 UPI20 was launched, and four new functions were added: first, the link to the overdraft account; In addition to their current savings account, users can connect their overdraft account to UPI20。the second is a one-time authorization; A one-time license will provide users with the ability to block payments on the current date and make payments to another user at a future date. the third is the verification of merchant invoices; Users can get the e-invoice from the merchant in their inbox before completing the payment, view and verify that the invoice is from the correct merchant in advance, and pay after verifying the invoice amount and other important details. Fourth, the QR code signature intention; Notify the user with a message to determine if the merchant is a verified UPI merchant, and if NPCI is unable to confirm that the merchant is an authenticated UPI** merchant, the user will be notified as soon as the QR code is scanned.
4. Characteristics of UPI.
1) Payment interfaces that can realize interbank interoperability.
When using any mobile banking app that integrates UPI to transfer money, NPCI converts user information such as mobile phone number, digital ID, and VPA into vouchers, and then encrypts the credentials into a secure toolkit, and transmits the credentials through the core transaction layer of the bank through IMPS, so that the mobile banking app of a bank (such as Citibank) can call other banks to verify the account for operation. The benefit is that when users use the UPI in any PSP (Payment Service Provider) application to make transactions, all transaction data has been encrypted and stored by NPCI, and the application provider is only responsible for the front-end service and cannot collect any back-end core transaction data.
2) Provide a personalized payment experience.
Not only is UPI payment completely free, but the PSP app, virtual payment address VPA, and linked bank account can be used to transfer money. You can also create a personalized UPI console in the app, generate a QR code to receive transactions, or withdraw money from any bank's ATM by scanning the *** of the self-service ATM via UPI.
3) UPI integration with mobile wallets.
According to the Guiding Opinions on the Issuance and Operation of Prepayment Payment Instruments issued by the Reserve Bank of India, the Indian mobile wallet company is currently separating the wallet cash from the customer experience and deep application, and integrating the customer experience and deep application module with the "collect" function of UPI, so that the mobile wallet can run transactions through UPI, and in this process, the mobile wallet will treat UPI as another payment channel or a funding account that supports the transaction. Since UPI is built on the interbank transfer platform IMPS, it does not support balance (top-up amount) transactions in mobile wallets. However, some payment institutions (such as Paytm) that have obtained a payment bank license in India transfer the balance of their mobile wallets to the account of the company's payment bank, and then make a bank transfer through UPI.
4) The app of the fintech company took the initiative to launch a UPI-based transfer platform.
UPI is currently connected to e-commerce** such as Flipkart, Amazon and Snapdeal, while fintech companies such as Google Pay, TrueCaller, Uber Taxi and Xiaomi have launched UPI-based payment platforms. In 2018, WhatsApp launched a UPI-based payment feature. Due to UPI's opening of the batch collection and payment function, even some large logistics companies, vegetable merchants, and small loan companies have embedded the UPI transfer function in their mobile APP applications.
(2) Comparison between UPI and mobile phone number payment
UPI is often compared with UnionPay QuickPass in China, and the author believes that UnionPay QuickPass is similar to the Bharat Interface for Money (BHIM) 9 launched by NPCI on the basis of UPI, while UPI is more similar to the mobile phone number payment function module in the mobile banking of banks in China
3. The success of UPI in India has enlightened the development of mobile phone number payment in China
UPI and mobile phone number payment are both underlying interface systems, embedded in the applications of various institutions, do not participate in the competition of the payment market, and belong to non-profit financial infrastructure. Therefore, learning from the successful experience of UPI in India is helpful to the development of mobile phone number payment business of banks, and at the same time, the problems encountered in the promotion of UPI in India also need urgent attention. In addition, UPI is only a small part of India's "India Stack" plan to build a digital India, and while the "India Stack" plan has exposed many issues such as information security and law, the country's innovative ideas are worth Xi learning from.
(1) Try to introduce third-party institutions in promotion
UPI connects to the applications of payment institutions, fintech companies, e-commerce platforms, logistics companies and even large merchants through banks. Banks can try to introduce third-party institutions to develop mobile phone number payment, and use financial technology innovation pilots and "regulatory sandboxes" to test the risks of introducing institutions and application scenarios, and can access the opening banks of such institutions to promote the development of inter-bank transfer business.
(2) Functionally expand characteristic application scenarios
The most distinctive function of UPI is "interoperability", which can be linked to bank accounts through UPI operation, and bank mobile phone number payment can learn from its "interoperability" to develop its own characteristic functions. In addition, UPI also has functions such as one-time authorization, batch collection and payment, QR code transfer, etc., and mobile phone number payment can be combined with the regular loan and real-time loan business of the micro-payment system to open real-time or regular centralized collection and payment services, which is conducive to the expansion of e-commerce platforms and other application scenarios for banks.
(3) Pay attention to information security protection in risk avoidance
With the opening of payment from the dedicated financial network to the Internet, various application risk events are frequent, and personal information leakage is repeatedly prohibited, and it is foreseeable that in the future, users will pay no less attention to the security of personal information than the security of account funds. The virtual payment address VPA set by UPI can hide sensitive information such as name, ID number, account number, password, etc., while the transaction information can only be queried by the payee bank and NPCI, completely blocking the application operated by the user and the mobile banking of the non-payer bank10. In the process of expanding new scenarios, in addition to preventing payment channel risks such as "two clearances", mobile phone number payment should pay more attention to the security protection of personal information to prevent user information from being leaked through third parties.
(4) Be alert to the problems encountered by UPI
There are also some problems in the use of cashback and discounts in India's mobile wallet business, such as triggering customer competition, huge investment in user promotion training and upgrading the system, the learning attitude of the Indian people Xi and the habit of using Xi, the low penetration rate of smartphones in rural areas, the stability of the mobile banking system and the different UPI front-end platforms in different versions of mobile banking, which increase user confusion, etc. Timely handling and effective prevention of such problems will help the further development of China's bank mobile phone number payment business.
(5) The future development of mobile phone number payment
"Payments is just the tip of the iceberg when UPI is transformed, payments itself is a huge market, and in the coming years, UPI, with its superior innovation and excellent minimalist design, will be a game-changer," India said. "In the future, the mobile phone number payment business of China's banks can not only be limited to transfer payment, but also explore the derivation of financial products in the transaction method. Mobile phone number payment can be widely used in microfinance, SME loans, consumer finance, custodian accounts, multi-party transactions, asset financing, etc., by virtue of its advantages such as no middlemen and minimized voucher transmission, so as to greatly reduce the transaction costs of existing products.
(6) Consideration of financial security and efficiency
UPI can not only realize the statistics and collection of transaction data in various industries, but also the VPA transmitted by UPI can effectively encrypt the amount of funds, desensitize user information, prevent the disorderly collection of personal data by fintech company apps, and put payment data into the cage of the regulatory system. In addition, NPCI has also set a 33% payment market share cap for mobile payment service providers using UPI to eliminate the emergence of monopolies. Here, it is hoped that China can upgrade the construction of financial infrastructure to the national strategic level, as well as the construction of modern infrastructure, formulate the implementation plan as a whole, hand over the operation and maintenance management and biometric data storage to non-profit institutions in the overall operation process, pay attention to the construction of the underlying platform rather than participate in the competition in the payment market, and change the situation that the institutions have their own systems and collect data in the past, and the institutions only have the right to use data and information, so as to reduce duplicate construction and waste of resources, and ensure information security and independence.