By ECONOMICTIMES.COM | Nov 19, 2016, 09.30 AM IST
The small number of users that want to change the default can then change it later if they don not like the defaults.
By Pawan Goyal
With the recent demonetisation move, the government has clearly declared its intent to move towards a cashless society. The common solution that is proposed for this is digital wallet. Want to send someone money using just his/her phone number, receive money using your phone number,transact online without credit/debit card use a wallet.
The wallets are very usable and great for the unbanked, but they take users with bank accounts outside the banking system. The wallets are a closed ecosystem you can transfer money within wallets of one provider but not across wallet providers. Also, it is difficult to encash money stored in a wallet. To encash money, you have to transfer money into a bank account a leading wallet charges 4% to transfer money into a bank account!
What if there was a solution that kept you inside the banking system, and, was as easy to use as wallet?
The solution already exists, and, is known as Unified Payment Interface (UPI). UPI is a bank account to bank account money transfer system that moves money instantaneously. The sender and the receiver both need to register for UPI and have a virtual payment address (VPA). A VPA can be as simple as userphone-number@bankname. If both the the parties are registered for UPI, then the process for sending and receiving money is same as wallet. The good thing with UPI is that your money always remains in bank account, in an open ecosystem and, not a third party closed ecosystem wallet.
You can withdraw at will without any charges for transferring to bank account. The question is if UPI is as convenient as wallets, why has it not taken off?
There are two reasons for that. The first is that the banking apps that have rolled out UPI, have designed the experience very poorly. They have made many rookie designer mistakes such as using terminology that does not make sense to a common user of the product and exposing all the flexibility when most common use case is simple. For example, when you register for UPI, the first thing you are asked to do is to create VPA. Most users are left scratching their head as to what is a VPA.
There is no prompt/suggestion as to how to create VPA. The format of the VPA is similar to email address. While many users will be familiar with email, most users will not be. Hence, the presentation of VPA needs to be simplified such that a typical user does not have to deal with the "@" symbol. The net result of this experience is that one gets intimidated, and, stops at the first step of creating VPA.
The second reason is that the rollout process has not been done well. Once you create a VPA, you want to transact with someone. You just don't know who you can transact with the other person also needs to have created a VPA. When I created a VPA, I did not know of anyone who had VPA. Hence, UPI functionality was left unused for several months in my banking app. If most of the people who have bank accounts had a default VPA created, then one does not have to get over the hump of creating VPA, and, can easily start transacting.
For example, most of the accounts have a mobile number or a aadhaar number registered with them. Hence, for each account with a bank, a default VPA of mobilenumber@bank or aadhaarnumber@bank can be created. If multiple accounts at the bank have same mobile number, the bank can associate the most used account with the VPA.
The small number of users that want to change the default can then change it later if they don not like the defaults. UPI actually has plans to even eliminate the "@bank" part and use mobile numbers and aadhaar numbers as default VPAs. However, the timeline for that rollout is not known. The above suggestion can be implemented by each of the banks with no central decision.
Now let us put both the things together. If the UPI implementation by banks were to have a default VPA created with mobile/aadhaar number, and the user experience for transaction just asked for the other party's phone/aadhaar number and bank name (the phone/aadhaar number can be translated to VPA behind the scenes), then the user experience for UPI enabled banking applications will be as good as wallets if not better.
The infrastructure and base ingredients are there the banks just need to put them together with end customer experience at the center just as wallet companies are doing it. It is time the banks seize the once in a lifetime opportunity created by the Prime Minister, and put their weight behind UPI adoption for a digital and cashless society.
Pawan Goyal is the General Manager in a leading software product MNC. He has a Ph.D from The University of Texas at Austin and B.Tech from IIT Kanpur.
