A JOURNAL OF COMPOSITION THEORY ISSN : 0731-6755

A STUDY ON AWARENESS AND ADOPTION OF UNIFIED PAYMENTS INTERFACE(UPI) FOR DIGITAL PAYMENTS

Pragya Chawla, Arun Singhal & Pawan Bajaj MBA-Apex Institute of Technology Chandigarh University, Gharuan, Mohali

Guidance: Prof. Prerna Dhawan Chandigarh University, Gharuan, Mohali

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ABSTRACT

‘Unified Payment Interface’ is a system for inter-bank transfers that allows sending and requesting money. It is developed by National Payments Corporation of (NPCI) and regulated by Reserve . BHIM-UPI app is built over the Immediate Payment ​ Service(IMPS) infrastructure and allows the user to instantly transfer money between bank accounts of any two parties. Multiple bank accounts of a client can be linked to the UPI app. ​ BHIM app allow users to send or receive money to or from UPI payment addresses, or to non-UPI based accounts (by scanning a QR Code with account number and IFSC Code or MMID(Mobile Money Identifier) Code. Banks that are listed with the UPI application by NPCI are termed as Payment Service Providers (PSP). PSP is a term which refers to those banks which have their own mobile application to facilitate transaction. Issuers are those banks which don't have their payments interface and rely on third party software for transaction using UPI.

In this paper, an attempt is made to identify the level of awareness among people about the Unified Payment Interface and on what basis they select their mode of digital payment. This research work was done to identify the adoption of UPI in money transfer system. Both primary and secondary data has been used in this paper to make full utilisation in order to accomplish the objectives.

Keywords: UPI, BHIM app, Digitalization, Digital Wallets. ​

INTRODUCTION

CASHLESS transactions are not new to India. There are various ways for cashless transactions available to customers as per their needs. It can be done through cards like debit card, credit cards, via NEFT/RTGS or digital wallets. Various applications like , Mobikwik etc. applications can be used for cashless transactions on smart phones. On 8th November 2016, the , took a historical measure of social engineering called Demonetization. Two major denomination notes, Rs. 1000 and Rs. 500 which made around 86% of total currencies in India, were demonetized with immediate effect. Government placed restrictions on the convertibility of domestic money and bank deposits. For a period extending to over 2 months, there was a shortage of cash in the country. People were in search of easier, faster and cash equivalent measure of payment. This shortage of cash period led to opening new era of digital currencies in India. Many market players entered in digital payment and developed apps to take advantage of new opportunities and made huge profits. The usage of mobile wallets experienced massive growth in users. One of the companies that bagged the opportunity was Paytm. The extensive marketing strategy of the company worked and it reached

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even the smallest retailers like the tea-sellers and ice-cream vendors who were tapped as point of contact with consumers, who needed a cash free payment mode. Other wallets too followed and a lot of mobile wallets experienced a growth in number of users in year 2017. Although UPI was launched in August 2016, way before demonetisation, it could not tap the number of customers as the mobile wallets did at the time of demonetisation. Unified Payment Interface is a payments system launched by the NPCI, the umbrella organisation for all retail payments in the country. It is a fast track payment method which facilitates instant fund transfer between two bank accounts on a mobile platform without requiring any information about the beneficiary’s bank account except a VPA. Govt. also launched Aadhar Merchant Pay which was aimed at 350 million people who do not have access to phones. In AMP, payment can be made by just using biometric identification requiring Aadhar and Bank account only. As per RBI survey data indicates that during December 2016 RuPay and other wallets are accounted for 95 billion in transaction and UPI only 7 billion as compare to 314 billion for debit card (excluding RuPay and ATMs) and 270 billion for credit cards. Clearly, the absorption of UPI was much lesser at that time, but it has increased over time.

REVIEW OF LITERATURE

Bappaditya Mukhopadhyay (2016) studied cashless payments in India. He developed a theoretical model of payment decisions made by consumers and sellers. He found that the convenience of cashless transactions weighed against the temptation to evade taxes.

Rahul Gochhwal(2017) has done research on the advancement in payment systems through Unified Payment Interface and found that UPI is the most advanced in the world as it includes low transaction cost and instant settlement as there are no intermediaries involved. UPI has allowed different banks to communicate with each other and has enabled interoperability between disparate bank payment systems.

Suma Vally and Hema Divya(2018) studied consumer adoption of digital payments in India. The results indicate that the deployment of technology for digital payments have improved the performance of banking sector and able to achieve the motive cash less country. The study gives emphasis to the percentage of awareness on maximum utilization of technology. Banks should take effective measures in creating awareness towards the effective usage of technology and security.

Somanjoli Mohapatra(2017) analysed e-transaction process through UPI where he defines the various features of UPI and its app BHIM-UPI. The full payment mechanism and security features are described in this paper and comparison has been done between different online payment apps. The UPI seeks to make money transfers easy, quick and hassle free.

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Roshna Thomas & Dr. Abhijeet Chatterjee(2017) assumes UPI as the catalyst tool supporting digitalization and through his research he found the utility, prospects and issues of UPI payments. According to him, major challenge for UPI adoption is financial inclusion where most of the rural population don’t have access to the banking sector and other challenge is mobile services as services provided by the service operators are still out of the reach of lot many people. In order to overcome these situations wallets were not allowed to provide the UPI services as it is in communication with the banks with whom the customer can link their UPI.

PROBLEM STATEMENT

Digital payments have revolutionised the payments in India. UPI although being superior and faster than all the available systems for small payments, is not very popular. Through this research paper, we intend to find out the preferences of 215 respondents in Chandigarh region about digital payments, their knowledge of UPI mechanism and level of satisfaction of UPI users amongst them. This would give us a fair idea of which payment system do they prefer the most and why, and also how UPI can be promoted.

OBJECTIVES

● To find out the most preferred mode and application for digital payments by the people. ● To find out the frequency of digital payments by different age and income groups. ● To find out the level of awareness of UPI and its adoption by people of different age groups and income levels. ● To find out the problems encountered while using UPI. ● To suggest the measures for attracting more consumers

METHODOLOGY

The data is based on both primary and secondary source of information. Data Collection Tool for primary data was structured questionnaire with a set of questions. The questionnaire related to research study was circulated online to gather all relevant information. Convenient sampling method was used on 215 respondents who were surveyed through structured questionnaire. Respondents include most of the college students in the region of Chandigarh who use digital payments at various outlets and for inter-bank payments. Certain useful findings were made from Secondary Data collected using previous research study on similar topics and other websites.

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DIGITAL PAYMENT MODES IN INDIA

There are number of facilitators which are leading to the growth of digital payment and transition from cash economy to a less cash economy. These facilitators include penetration of internet connectivity on smart phones, non-banking financial institution facilitating digital payment, one touch payment, rise of sector and push by government either by giving incentives or tax breaks. Today there is a positive atmosphere for growth of digital payment in India. Currently there are several modes of digital payments available in India. These include:

● Online or mobile wallets ● Prepaid credit cards ● Debit/RuPay cards ● UPI: Unified Payment Interface ● NEFT: National Electronic Funds Transfer (NEFT) ● RTGS: Real Time Gross Settlement.

COMPARATIVE ANALYSIS OF ALL DIGITAL PAYMENTS MODES

Modes of Debit / RTGS NEFT IMPS MOBILE UPI Payment Credit WALLET Card Basis of difference

Suitable for Online/offli High value High value Instant Small-ticket Instant ne merchant online online transfer transactions. transfer sale. transactions transactions.

Transaction Set by card Minimum 2 There is no Rs 2 lakh Rs 20,000 per Rs 1 lakh limit: issuer lakh. No ceiling on per day month (Rs 1 maximum the lakh for limit minimum or KYC-complia maximum nt wallet amount that holders) can be transferred

Details Card Account Account Account Login ID & VPA (virtual required: number, number number number password payment ID)

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CVV, Password Password Password of recipient, Expiry date, Beneficiary Beneficiary Beneficiar m-Pin PIN registration registration y IFSC code IFSC code registration IFSC code

Cost per Debit cards: Outward Up to Rs 25 Rs 5-15, Only if you Less than 50 transaction: Up to transactions per depending transfer money paise per 0.75%- 1% upto Rs 55 transaction. on from your transaction. Credit as per transaction wallet into cards: transaction amount. your bank around 2.5% account. per transaction

UPI PRODUCT STATISTICS AS PER OFFICIAL WEBSITE OF NCPI (https://www.npci.org.in/product-statistics/upi-product-statistics) ​ ​

Month No. of Banks live on UPI Volume (in Mn) Amount (Rs. in Cr.)

May-19 143 733.54 1,52,449.29

Jan-19 134 672.75 1,09,932.43

Dec-18 129 620.17 1,02,594.82

May-18 101 189.48 33,288.51

Jan-18 71 151.833 15,571.2

Dec-17 67 145.463 13144.3

May-17 49 9.168 2765.4

Jan-17 36 4.153 1658.8

Dec-16 35 1.967 706.2

Aug-16 21 0.093 3.1

A close study of this table indicates how just in a span of less than 3 years, the volume of UPI transactions has increased to 700mn. These are official statistics from the website of NPCI. UPI

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has brought a big change in peer to-peer payments and a lot of recurring cash transactions are now done via UPI.

DATA ANALYSIS AND INTERPRETATION

The data for this study was collected through a questionnaire circulated via internet to around 230 respondents out of which 215 responses were recorded. The respondents comprised mainly of students (75%), rest all were Govt Employees (1.4%), Private Employees (15.7%), Business (5.1%) and Self Employed (2.8%). Majority of respondents belonged to the age group of 21-25 (76.3%) while rest were in the age brackets of under 20 (9.8%), 25-30 (10.7%) and rest were above 30.

RESEARCH INSIGHTS

1. The study revealed a very diverse nature of preferences of payments by respondents. The most prefered option was debit card followed by cash and the least prefered was . (chart 1) 2. Paytm (94 respondents) and (57 respondents) capture almost 70% of market for mobile applications amongst 215 respondents. This shows high inclination of people towards both of these applications. (chart 2) 3. The responses show that most digital payments are used for payments below Rs 1000 (chart 3) 4. A very useful insight that was generated was that as many as 48 people believed that the mobile wallets give interest on keeping money in them, which is not true, neither permitted.42 people were totally unaware about the same. Therefore almost 41% respondents seemed unaware about interest rates in wallets. (chart 4) 5. Out of 215 respondents, 113 were completely aware about UPI, which shows a comparatively rich absorption of UPI in this region. (chart 5) a whooping 158 respondents actually use UPI for digital payments. (chart 6) 6. Paytm & google pay lead the wagon in the application used for UPI as well. (chart 7) 7. One good indicator was that most respondents considered the registration mechanism, using the UPI and overall interface of UPI as easy. There was rarely someone who considered it as difficult. (chart 8) 8. Over 123 people believe that Mobile wallets are easier to use than UPI, which is an indicator of complexity of operation in UPI which needs to be looked after. (chart 9)

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9. also ,over 200 respondents wish that Transaction costs via any mode of payment should be transparent, which is not in case of debit cards, credit cards and wallets. Here UPI has a good opportunity to tapp (chart 9) 10. Over 50% respondents believe there is a lack of information on digital payments system. 11. People in income group upto 10000 prefer cash the most, while people in the income bracket of Rs. 10000- rs 25000 use UPI the most. For rest income groups the level of variance is not very much. (chart 10) 12. The frequency of people using digital payments is the most in age group of 21-25. In the age group above 35, there were respondents who use digital payments rarely. (chart 11)

CHALLENGES FACED BY UPI Every innovation brings with it several challenges and threats. Some of these challenges are gradually treated over by time and some linger on forcing the user to make adjustments and UPI is not an exception. UPI has its own challenges which need attention. These are :-

1. A foremost challenge a user of UPI has to face is the dilemma whether the party to whom he wishes to make payment is registered on UPI or not and if he/she is registered then what is the VPA (Virtual payment address) or registered mobile number of that person. 2. The four party model of UPI where the customer of one bank is at liberty to use the application of another bank creates a gap and dilemma of failure of transaction. Also it makes grievance redressal difficult as the customer may remain confused as to whom should the problem be addressed to. Many a times the customer takes his issue to the bank which holds his account but at the same time the transaction may not have been visible to his bank as it was performed with the UPI application of some other bank. 3. Another challenge the UPI faces is that in framing its enface the NCPI creates and offers only the backend solution and lets its partner bank create the front end application. Many banks have tried to adjust the UPI into their existing apps thus giving rise to a range of issues. 4. Dissimilarities in the screenplay and options for UPI app for various banks adds to the confusion of the customer and also makes training and demonstrations a bit difficult to the new user. 5. Although India can boost of having position of second largest Smartphone user base in the world out beating even the US (Indian Express,2016), the penetration of Smartphone within the country especially the rural penetration is still comparatively less. 6. Banks aren’t completely computerized which adds to the list of challenges for UPI. UPI’s proper and full fledged working will need training of merchants, staff, retailers, improving point of sale systems and upgrading existing technology among others all of

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which needs significant investments. These all will be required to ensure wide scale adoption of UPI. 7. Despite the propagation and promotion of UPI and other digitalized payment modes by the government and even after the strong move on demonetization people have shown a huge dependence on cash which is mainly due to lack of financial literacy, education, awareness and most importantly strongly inbuilt attitudes and habits which will take a considerable time to reform.

SUGGESTIONS TO IMPROVE VOLUME OF PAYMENTS ON UPI

1. A very big with UPI is that cash sent or received goes directly into a bank account. In digital wallets such as Paytm, payments and cashbacks stay in the wallet. Also these typically involve a fee for moving the money to a bank account. This fact needs to be properly communicated to prospective customers. The more people start understanding this, more shifts would be seen towards UPI payments. 2. UPI adoption and extensive use for merchant payments needs to be targeted. According to figures from chief digital officer, , there is an ecosystem of around 40 million merchants in this country who are not using electronic payments. They need to be targeted. Mobile wallets became successful when small merchants, tea vendors and kirana (neighbourhood) shopkeepers started accepting them and similar market targeting should be done for UPI to make it a game changer. 3. The facts and figures from NPCI and the research insights from this research suggest that more volumes could be generated out of the individual-to-merchant payment space. This could be for rent payments, bill payments, contributions to chit funds or mutual funds etc. 4. The initial growth in usage of UPI was mainly being driven by demand that arose post demonetisation, but to sustain this growth the industry needs to create multiple use-cases for UPI payments just like digital wallets have managed to score points by adding multiple use-cases. 5. UPI should come up with bigger value proposition for merchants for example, loyalty programmes, post-purchase analytics, merchant ratings, systematic savings etc which will manage to take UPI to the peer to merchant space.

CONCLUSION Despite all the claims of government, the most preferred mode of payments remain cash & cards on an average. Although usage digital payments has increased manifolds by the people in all age groups, but more awareness needs to be spread especially in field of UPI. The frequency of digital payments is highest in the age groups of 20-35 and least in above 40. People are although aware of UPI but are not as inclined towards it as they are to mobile wallets and debit/credit cards. The new technology faces challenges that need to be addressed and taken care of in order

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to promote it in future. In case of UPI the front-end platform is to be designed by the banks. If ​ ​ banks fail to work effectively on this then consumer adoption of UPI will be difficult more likely because private mobile firms have sincerely invested in creating merchant network to ensure smooth and failure free payment process. Moreover they have also included cashbacks and discounts to attract customers atleast but for a trial usage. Already the mobile wallet companies of India have a larger customer base compared to existing bank supported apps combined. If UPI fails to deliver its promise in creating a one stop solution for financial payments then banks will loose their revenue to private fintech companies. The UPI allows consumers to transact directly through their bank account with a unique UPI identity which syncs to Aadhar’s verification and connects to the merchant for the settlement and lets the issuing bank to close the transaction. In a single swipe the transaction is complete without any middlemen (like Visa and Master Card swich) to facilitate the transaction. This also has been possible because India is the only country which has been able t register more than one billion of its population (DNA, 2016) on the identification database called Aadhar. Thus a robust Aadhar platform is one of India’s superior achievements which will aid the country to digitalize its payment services through UPI.

REFERENCES

1. https://www.livemint.com/Money/A1bTvyBsfMmZeNu6oSfozJ/4-reasons-why-UPI-may -overtake-mobile-wallets-soon.html 2. https://www.researchgate.net/publication/320661583_Unified_Payment_Interface-An_A dvancement_in_Payment_Systems 3. https://www.irjet.net/archives/V4/i11/IRJET-V4I11136.pdf 4. https://acadpubl.eu/hub/2018-119-15/3/546.pdf 5. http://ndpublisher.in/admin/issues/IJASEV5N1e.pdf 6. https://www.scirp.org/journal/PaperInformation.aspx?PaperID=79879& 7. http://www.ijiras.com/2017/Vol_4-Issue_2/paper_43.pdf 8. http://www.ijsrd.com/articles/IJSRDV5I41170.pdf 9. http://oaji.net/articles/2017/490-1519293244.pdf 10. http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Articles/India_rea dies_Unified_Payment_Interface_for_mobile_payments.pdf 11. www.rbi.org.in 12. www.trai.gov.in 13. www.npci.org.in 14. www.cashlessindia.gov.in/upi.html.

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