Learnings from Unified Payments Interface in India

Nearly one year ago I have written about the beta launch of WhatsApp payments in India (Blog post). The service allows any payments-activated user of WhatsApp in India to send money to other WhatsApp users. However, the service is not yet available nationwide, due to regulatory problems. The Indian regulator requires WhatsApp to process the payment data purely on Indian servers but it is currently being processed on Facebook servers in the US. WhatsApp is in discussion with the regulators to find a solution. Most likely WhatsApp will comply with the request from Indian authorities and might also set up a payments team in India (another request from the regulator). It would probably be a worthwhile move since WhatsApp has more than 200 million monthly active users in India making it’s the biggest market for WhatsApp. Apparently there are already one million WhatsApp user activated for the payment feature (Source). Payment services are on a rise in India and due to the success of other providers definitely not an opportunity WhatsApp wants to miss out.

But why are payment services so popular in India? Demographics and mobile usage are definitely supporting this trend but besides that there is another ingredient for the success: UPI. UPI stands for Unified Payments Interface, it has been launched in India in April 2016 and is run by NPCI (National Payments Corporation of India). Signing up as a user is pretty easy and works purely through the smartphone: Before starting to register for an UPI-based payment service, the mobile phone number needs to be registered with the relevant bank (supported banks). Once this is done, the user can sign up for any UPI-based app and only needs to verify mobile phone number and debit card details (Details about signup).

WhatsApp is one example for UPI payment services but there are many more. Even PayTM and Google (formerly known as Google Tez in India, but now also rebranded as GooglePay) are built on top of UPI and food delivery services such as Swiggy benefit too. While reading about UPI you might come across the name Bharat Interface for Money (BHIM) or BHIM UPI. BHIM is a mobile payments app developed by NPCI as well and built on top of their own UPI. Actually PayTM and GooglePay have integrated BHIM instead of UPI. This has various reasons but main advantage for users of BHIM is the aggregation of different accounts into one app. To summarise the two offerings, BHIM is the end consumer solution of NPCI while UPI is the platform in the background (read more about BHIM vs. UPI).

In Europe we are eagerly waiting the launch of PSD2 APIs, and personally I have said often, that especially payment initiation service providers (PISP) might have the biggest impact. However, when you compare possibilities from a future PISP in Europe with a service provider from India who is benefiting of UPI, you realise quickly that UPI offers a lot more benefits. The signup does not require the user to enter any bank account credentials but works purely through mobile verification. Furthermore, single click verification combined with instant real time payments make the process easy and convenient for the user and reduces the risk for the recipient of the money. When somebody would design a payment interface from scratch, it would definitely look more like UPI than PSD APIs.

Nevertheless, I wouldn’t advocate to copy UPI in Europe. PSD2 APIs are the step in the right direction, and might become even more powerful than UPI. However, there are still plenty of learnings for us Europeans around UPI and other payment solutions in the rest of the world, and it would be shame if we do not benefit from them.