85. Payments Digest — X
Julius Caesar, apart from being a military genius, is known for being the first Caesarean baby, won the rebellion, married Cleopatra of Egypt, commissioned the Julian calendar (the one we hate on Monday mornings), became a ‘dictator’ and eventually got stabbed 23 times.
Conquest of Gual was one of the important military campaigns of Caesar.
During the battle of Alesia, Caesar’s army of 60,000 men built a wall around the city of Alesia. And then, Caesar gets the news that a 2,50,000 Gallic army is heading towards Alesia to break the siege. Caesar has to decide how to win against Alesia and also, defend against the mighty army that is heading towards him.
So what did Julius Caesar do?
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In 2023, we saw many changes in the payments world. I have covered those in articles related to — cards, UPI, Internationalisation, Recurring Payments and many others.
Last few months were no different… many things have happened.
GFF Product Launches:
In the first week of September, we had the 4th edition of GFF — Global FinTech Festival.
Since its inception, we have witnessed new product launches in every GFF.
- 2020: UPI AutoPay, RuPay commercial card
- 2021: Account Aggregator
- 2022: UPI + Credit Card, UPI Lite, cross-border BBPS
Continuing the tradition, this time 5 new products were announced.
Here is the summary (details will follow later)
- UPI + Credit Line
UPI allows users to connect UPI ID/VPA to various sources: bank account, Overdraft (OD) account, PPI wallet, UPI Lite wallet, NRE/NRO account, credit card.
Now, a user can link her bank issued credit line to VPA and make payments by using credit lines (of course, there will be limitations on which merchant category it can be accepted, amount and there will be fee/MDR).
This is a game changer as it bundles credit (without the cost of card) and UPI together. One can say it is UPI moment for the credit or UPI moment for UPI itself :)
We are in the early days of UPI + credit line. Let’s see how it plays out.
2. UPI Tap and Pay
“Does it have WiFi?” — that is what the shopkeeper asks when you give your credit or debit card to make a purchase… right?
Not sure how but somehow all shopkeepers decided to refer to NFC (Near Field Communication) technology as WiFi!
A user can tap the card on NFC enabled POS and make payment up to Rs.5000 without entering the PIN. Remember, the user has to enable the ‘contactless payment’ option and set transaction limits on her banking website or App.
The same Tap & Pay is coming to UPI (Link to the Circular)
- User can tap on an NFC Tag or a Smart QR
- Amount is deducted from UPI Lite wallet
- Maximum amount per debit is Rs.500
And NPCI has set 31st Jan 2024 as a date for the go-live.
3. UPI Lite X: Users can send and receive funds offline (without or poor internet connectivity). This could be good considering many places (even in big cities) have poor networks.
4. Hello UPI: Soon UPI will have conversational payments where users can talk and pay (of course, UPI PIN needs to be entered). The feature will be available in English and Hindi, and eventually more languages.
So, in the future, we can not only talk about payments but also talk & make payments.
5. BillPay Connect: Conversational bill payment — NPCI has rolled out a nationalised number for bill payment. Users can either chat (by sending Hi) and then fetch a bill and make payment or give a missed call and then make payment (IVR flow — based on UPI 123Pay)
Other UPI Updates
A. Swachh UPI
NPCI has asked banks and TPAPs to deactivate UPI Ids/VPAs that have not been used in a year by 31st Dec 2023.
In the last few years, I’ve created many VPAs on different UPI Apps (reasons: curiosity, free time and cashbacks — not necessarily in that order) but now I am using only one TPAP.
It is good to know that all those useless VPAs will be deleted.
Other Swachh Drives: Such a clean up drive is not limited to UPI alone — Since Aug ’22, RBI has asked banks to deactivate credit cards that are not used for 6 months or a year. Also, disable eCommerce or online transactions on cards that are not used for online purchases for a year.
Nothing new here — since ages, my family throws away useless things during the pre-Deepavali clean up activity and then we buy new things (to throw during the next Deepawali cleanup)
B. UPI for Secondary Market
UPI has this feature called ‘One-Time-Mandate’ — enables merchants to block the funds and debit once service is provisioned. Of course, the customer has to approve the one-time mandate and has control to cancel it on the TPAP. This feature allows one time blocking and one time debit.
The feature has wonderful usage in IPO (Initial Public Offering)
Last Year, NPCI announced new feature: One-time-Block-and-multiple-debits (as long as the sum of multiple debits <= blocked amount)
This feature can be used by cab or daily grocery or even food delivery use cases.
And one of the useful use cases is it can be used by stockbrokers to facilitate purchase of shares/stocks in the secondary market.
At present, a retail user has to load a stock broker’s a/c (kind of wallet) and then purchase shares. With this feature, stock brokers don’t have to hold customer’s funds as the amount can be blocked on the user’s account and debited directly. Of course, the feature has to work in combination with the TPV (Third Party Validation) feature.
The pilot for this will start from 1–1-2024
Card Tokenization — More updates
1. Guest Checkout: As you know, customers can either save the card or do a guest checkout. Refer articles on Tokenization and Cards-Update
After a couple of extensions to the deadline, Tokenization came into effect in Oct ’22 and the world rejoiced (just kidding).
Then in May’ 23, RBI issued tokenization of guest checkout cards as well.
Tokenization of guest checkout or Alt ID was supposed to be rolled out by 31–10–23 but then deadline is moved to 31–01–2024 (and 50% possibility of getting one more extension)
Update 1st Feb: As expected the deadline is extended, RBI is yet to confirm the deadlline
2. Push Provisioning of (card) Token
As you are aware, a customer has to tokenise the card for a merchant (on merchant’s website/App) by doing a successful transaction (above diagram)
On Dec’20 (2023), RBI issued a circular on enabling tokenization through card issuing bank (aka push provisioning) [Link to the circular]
Customers can tokenise the card through her bank at any time either during card issuance or later.
Feature will be applicable for all cards but has special usage in case of co-branded credit cards. So once a new card is issued, users can be nudged to tokenise a new card (on the bank’s app/site) and the tokenised card is available on partner merchant’s (and customer’s selected merchant’s) site/App.
Example: Swiggy has co-branded card program with HDFC bank. With the above process, cards will be made available on Swiggy.
Simple but not: Just like everything else in payments, even this looks simple as there are many moving parts. Issuing banks would need to manage the life cycle of the token and also, have a mechanism to show the tokenised card on the merchant’s site.
One more good opportunity for FinTechs to build a platform for the banks.
New process → New challenge → New platform → Opportunity for a FinTech
IMPS (Immediate Mobile Payment System)
IMPS is real-time payment solutions where a user can transfer funds from her bank account to another bank account. For details read — Here and Here
IMPS rails can push funds to
- Bank account number + IFSC
- Mobile Number + MMID (Mobile Money Identifier Number)
- Credit Card number + IFSC (Prior to tokenization)
- Virtual card number + IFSC (Read here — Refer point IV)
Now IMPS has added a feature to transfer funds to a combination of Mobile Number + Bank Name. This will use existing mobile number + MMID flow
Talking of IMPS, recently UCO Bank wrongly credited Rs.820 crore due to technical glitch in its IMPS platform. Wow!
Limit Update:
Payments work within boundaries — acceptance channels (e.g., works on POS only), merchant site (e.g, works only on mobile App), geography (e.g.,only in India), merchant category (e.g.,Credit Card is not allowed for loan repayment) and transaction limits.
Transaction limits are enforced on payment modes to safeguard customers. Although at times, such limits may restrict the use cases (if ticket sizes are higher) and that may create ‘some’ hassle for customers and/or for merchants.
Time-to-time RBI has revised the transaction limits for various payment modes and products to accommodate larger use cases.
Recently, transaction limits were updated for UPI products
Transaction limit changes to other products (last couple of years):
NACH (paper and digital) limits were also harmonised in 2023
Apart from these product or payment mode level limits,
- A user can also set the transaction limits (number of txns per day, daily amount and/or per transaction) on credit card, debit card and net-banking transfers and also
- Banks have their own limits on different modes (e.g. limits on UPI by banks) at various stages — first time transfer, daily/weekly/monthly limits, first 24 hours of adding new beneficiary
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Let’s get back to our story —
So far, Caesar has built a wall around Alesia and a huge Gallic army is heading towards him. So what will he do?
He came up with an ingenious idea….
Caesar built an outer wall and placed his army between these two walls.
He could fight on two fronts while having buffer between two enemy armies and Julius Caesar won
(else I would be writing why building two walls is a ridiculous idea)
Most of the things in the payments space are nothing but fighting on two fronts. Even before you implement a product, flow, policy or process, a new one comes on your way.
See, even before PA/PG licence is concluded, there is PA-CB (Cross-border) licence. So the FinTechs/Payment companies have to have a proverbial ‘two wall’ strategy.
But how will you anticipate the second army (or what will come next)?
One way is… you can guess the basis of what happened (in last couple of years) and what is happening.
If that is too broad or vague then maybe you can just start with RBI’s Vision Document 2025 (Read article — Here or Here) and you can anticipate what the regulator intends to do.
Wish you all wonderful 2024!
