With the government push for cashless transactions, after the demonetization of high-value currency notes, the electronic payments data released by the Reserve Bank of India presents an encouraging shift towards digital payments. The adoption of non-tradition digital payment mechanisms, i.e., payments made using Unstructured Supplementary Service Data (USSD) for mobile communications, Unified Payment Interface (UPI) and e-wallets is evident from the growth in volume of transactions and their value, albeit on a low base.
While the overall value of electronic transactions in December, over November, saw a growth of only 10.7%, the volume of transactions has swelled about 40%, indicating a jump in low-value transactions. At the same time, USSD and UPI transactions saw the volume and the value of transactions grow manifold (see table). But data often hides another story. “The growth is largely due to the low base. Having said that, the main reason for the current growth is the overall digital push that is coming through. There are still a lot of people who use feature phones. For some people, even if they use smartphones, the subset of people having continuous access to data is smaller,” said Vivek Belgavi, fintech leader at PwC India, a consulting firm. In either case, USSD becomes the favoured mode of transaction, he said.
That mobile payment systems will be instrumental in the digital shift, is evident from the more than 1 million downloads for the Bharat Interface for Money (BHIM) app. It is a platform that connects 31 major banks using UPI. If you are looking to adopt the new modes of digital payment, here are a few things you should know.
What is USSD?
In India there are many barriers to adopting mobile banking apps, such as: low smartphone ownership, high data charges and patchy internet network availability. Even among those who own smartphones, many just don’t feel comfortable using these apps. USSD-based services let you do mobile banking without having to download any app on the phone, and these can be used equally well from smartphones as well as basic feature phones, which cannot access mobile data.
In India, the National Payments Corporation of India (NPCI) has a USSD-based mobile banking offering called National Unified USSD Platform (NUUP). Using this, you can complete many basic banking transactions, such as send and receive money, check account balance and get a mini statement. NUUP is menu-driven so, unlike SMS-based banking apps, you don’t have to remember codes for the services you want to use. All the services can be chosen from a menu that appears on the screen.
You don’t need a smartphone or mobile data to use NUUP, but you have to ensure that you register your mobile phone number with your bank for this service. Once these prerequisites are in place, customers of any bank and, on any telecom network, can access this facility by dialing *99#. Next, you will be prompted to key in either a short name of the bank or its unique numeric code. For example, a State Bank of India (SBI) customer can punch in SBI to proceed with the transaction. Next, a menu will be displayed on the phone listing all the available services, with a number next to them. Choose the number next to your choice. For example, if an SBI customer chose ‘1’, and pressed ‘Send’, she would see her account balance. For sending money to merchants or any other person, you need their Mobile Money Identifier (MMID). If you don’t have it, you will need their bank account number and their bank’s Indian Financial System Code (IFSC). You can use this service 24×7 and the existing limit of daily transactions using the platform is Rs5,000.
What is UPI?
NPCI went live with UPI in April 2016. As of now, all major banks are live with it. To start using this platform, you need to have a bank account with a UPI-member bank, a smartphone to download its UPI-enabled app and a mobile number registered for this service. Once you download the app, you can create a Virtual Payment Address, also called the UPI ID, which can be in the format of name@bankname. Once you have this ID, you no longer need to share sensitive bank details for receiving payments.
To transact through UPI, you need to download a UPI-enabled banking app and then choose the UPI option. The process of conducting the transaction varies from app to app. However, with the BHIM app, which works as a common UPI platform for most banks, the process is now uniform. Instead of a bank-specific ID, the BHIM app uses your mobile phone number as your ID. As of now, the app allows registering with only one bank, using one mobile number. Android mobile phone users can download the application from Google Play. As of now, this app is not available for users of other mobile operating systems.
Once installed, the app will prompt you to verify your phone number over an SMS. After the verification is completed, you will have to create a four-digit passcode. After the passcode is set, you need to select your bank. At this stage, the app automatically picks up your details using your phone number, which should to be registered with your bank.
Currently, using the app, you can send and request money, and scan and pay (using quick response, QR, codes). But remember that the transactions are possible only between verified phone numbers.
Charges and User experience
For USSD-based transactions, the Reserve Bank of India has notified that no charges will be imposed by banks for transactions up to Rs1,000 till 31 March 2017. Moreover, the Telecom Regulatory Authority of India had recently reduced the charges imposed by telecom service providers for USSD-based banking transactions to Rs0.50 from Rs 1.50 per session earlier. Currently, there is no charge for UPI transactions either.
But technology experts are of the view that more than charges, the user experience makes a platform more acceptable. “More than costs, it is the experience that will matter. The only way people will not use cash is if the new way is easier than using cash, or if there are incentives. For instance, with mobile wallets, you have an option of just scanning the QR code and approving the transaction. With USSD, there are comparatively more inputs,” said Vijay Mani, partner, Deloitte, India.
Belgavi said that more work could be done on the user experience of USSD. “If you use any e-wallet, IMPS or an app, the user experience is managed by the app. All of these—USSD, IMPS or UPI—are underlying protocols but as an end-user you are interacting with an app, which is why your user experience is better. In a market like India, USSD is going to become an important channel in the short term,” he said.
So if you have a smartphone with access to mobile data, you will find UPI more convenient. But if you have a feature phone or intermittent data on your smartphone, USSD may be more convenient. Make your choice.