(BHIM) Which Is an App to Make Simple, Easy and Quick Payment Transactions Using Unified Payments Interface

Financial Technology Solutions

Chapter 7:Digital Wallets and Direct payment systems Learning Objectives

• This chapter will help you to understand the various options of payments in the form of digital wallets as well as the direct payment systems such as the Unified Payment Interface and the BHIM app powered by financial technology provided by fintech companies. 7.1 Introduction

• Digital transformation is affecting every business sector, as investor capital, top talent, and customers shift toward network-centric organizations. • Key players such as Financial Technology Intermediaries are paving new challenges and opportunities. • Digital networks are changing all the rules of business. New, scalable, digitally networked business models are affecting growth, scale, and profit potential for companies in every industry. FinTech intermediaries offer problem solving mechanisms • FinTech intermediaries offer problem solving mechanisms that can alter the market quickly, lowers costs and improves the overall quality of financial services. • Borderless Money Transfer, allows more stakeholders to enter the digital startup space, allows for a new brand of partnerships to emerge, improves automated systems of economic institutions , fast scaling with sufficient funding, creative innovation and personally tailored solutions for ideal customer service experience, larger chance to rework the status quo and current processes of money services on a global scale.

Need for better and smart tools

• Oldest cashless options - credit and debit cards - have limited reach. • Lack of a universal technology standard, disparate interests of stakeholders, and poor user experience have created a need for better and smart tools for making payments. • Newer instruments / devices to make the payments as per the choice of the users is always demanded by the learned and ambitious user community. Digital wallets

• Digital wallets have actually been around since the late 1990s. • First generation : Developed by a variety of entrepreneurial companies during the dot-com boom. • Second generation: Proprietary in nature and could not be used on each others networks. • Third generation: Software downloaded as apps on electronic devices such as smart phones. What is a Digital Wallet? • App on an electronic device facilitated by Near Field Communication (NFC). • Allows an individual to make electronic transactions, store virtual information . simple, affordable way to send, receive, and spend money • Allows the wallet holder to make an electronic payment with a financial instrument . Bank account can also be linked to the digital wallet • Does not reveal the customer information while executing the payment • Authenticates the wallet through the use of digital certificates • Contain a range of complementary applications • Wallet holders are encouraged and motivated to use digital wallets for all transactions by incentivizing Types of Digital Wallets

• Client-side wallet refers to those apps downloaded by the user on his smart phone, easily self-maintained and fully compatible with most e-commerce Web sites. Creativity of the developer creates different strokes in app. • Server-side wallet also known as a thin wallet store data on the company's secure computers, accessed by the email and password. Merchants generally prefer server-side wallets because they have a greater degree of standardization, higher level of security, efficiency, and added utility to the end-user. NFC (near-field communication)

• NFC (near-field communication) encrypted chip available on most smart phone is a vital component to the mobile digital wallet and secure the wallet transactions. • Digital wallets can follow two separate paths (a) Sophisticated wallets for general purpose which will use NFC for connectivity, and (b)the proprietary, retailer-based wallets for specific purpose which use a variety of technologies, including optical/QR code and BLE beacons. Necessity of partnerships and collaboration • Very few players have all the capabilities and experience for successfully launching and profiting from digital wallet market on their own efforts as it is extremely challenging to single handedly provide ewallet services. • Partnerships and collaboration with fintech companies to provide robust infrastructure and ubiquitous technology for establishing a seamless flow of digital wallet culture in a cash less economy. Capabilities and expertise of various fintech companies • Innovative methods culminating into proliferation and growth of financial technology solutions at a tremendous pace. • Digital wallets are effectively used to engage with the customer by the marketers and digital businesses. • Third-party digital wallets are successful in inserting a layer of e wallet services and relationship management between a financial institution and its customers. Enabler of commerce rather than a stand-alone revenue generator • Digital wallet space has been fragmented without a clear leader. Advances in technology have already changed the way we conduct payments, and will continue to heavily influence the market • Increased bandwidth is not only providing a customer delight experience but is also driving the explosion in digital wallet. • Payments have historically been viewed as utility products with limited opportunity to provide value-added services or solutions. However digital wallets can soon become a self- reliant ubiquitous ecosystem with the deployment of proactive digital wallet engagement strategy that fulfills consumer value proposition. Proactive digital wallet engagement strategy • Mass market appeal to leverage scale of economies. increasing the connection , Create powerful and new brand experiences • User-friendly wallet interface with ease of use, peace of mind (regarding security), and the ability to transact anytime and anywhere and optimize customer satisfaction. Content to save and manage • Provision for larger merchant base to make payments. Multichannel Payment options through NFC, tokenization and biometrics, eliminate fear of fraud and hacking • Acceptability and scalability of apps on a large range of electronic devices, automatic and instant receipt • Addition of the value-added services that go beyond just payment. Minimum swiping and data entry more touch points, seamless shopping experience, faster and more-secure, lower cost, greater convenience, multiple benefits • Satisfying the business and strategic goals Digital wallets are both a challenge and opportunity • Financial institutions and the regulator including government are putting in all out efforts for transiting India towards a less cash economy, promoting competition, open access & interoperability in payments. • The demonetization of Rs 500 and Rs 1000 currency notes has been working largely in the favor of digital wallet startups. • The business models and the payment methods have all changed. Online payments have become quick, hassle free and time saving. • People use their solutions for offline transactions and not merely for purchases made online. RBI’s Vision-2018 • The Vision-2018 for Payment and Settlement Systems in India reiterates the commitment of the Reserve Bank of India to encourage greater use of electronic payments by all sections of society so as to achieve a less-cash society. • The objective is to facilitate provision of a payment system for the future that combines the much-valued attributes of safety, security and universal reach with technological solutions which enable faster processing, enhanced convenience, and the extraction and use of valuable information that accompanies payments. • Vision-2018 focuses on four strategic initiatives viz., responsive regulation, robust infrastructure, effective supervision and customer centricity. • Fintech plays an important role in fulfilling the RBI vision Special attention to the 5C’s specified by RBI • Coverage – by enabling wider access to a variety of electronic payment services • Convenience – by enhancing user experience through ease of use and of products and processes • Confidence – by promoting integrity of systems, security of operations and customer protection • Convergence – by ensuring interoperability across service providers • Cost – by making services cost effective for users as well as service providers

The society is also responding well

• Card transactions have grown significantly at both ATMs as well as at the Point-of-Sale (POS). • RTGS and NEFT volumes increased almost threefold between 2013 and 2016 reflecting greater adoption of the system by all segments of users. National Payments Corporation of India (NPCI) • Umbrella organization for all retail payments system in India • Grown multi-fold from 2 million transactions a day to 20 million transactions in last few years. • From a single service of switching of inter-bank ATM transactions, the range of services has grown to Cheque Clearing, Immediate Payments Service (24x7x365), Automated Clearing House, Electronic Benefit Transfer and a domestic card payment network NPCI’s innovative products

• (a) RuPay card product( which is at all the ATMs, Point-of-Sale terminals and most of the online merchants in the country) to reduce the dependency on international card schemes, • (b) National Financial Switch (NFS) which connects over one lakh ATMs of about 500 banks, Immediate Payment Service (IMPS) to enable bank customers to use mobile instruments as a channel for accessing their banks accounts and remit funds, NPCI’s innovative products contd.

• (c) *99# service, which works on Unstructured Supplementary Service Data (USSD) channel(*99#, a common number across all Telecom Service Providers (TSPs) on their mobile phone to enable transaction through an interactive menu displayed on the mobile screen. Key services offered under *99# service include, interbank account to account fund transfer, balance enquiry, mini statement besides host of other services, help in financial deepening and inclusion of underbanked society in the mainstream banking services through low value remittances), NPCI’s innovative products contd.

• (d)National Automated Clearing House (NACH) for Banks, Financial Institutions, Corporates and Government a web based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature, • (e) Cheque Truncation System to stop the physical movement of the instrument and replace it by electronic images and associated MICR line of the cheque, • (f) Aadhaar Enabled Payment System(AEPS) online interoperable financial inclusion transaction at PoS (MicroATM) through the Business correspondent of any bank using the Aadhaar authentication, NPCI’s innovative products contd.

• (g)Bharat Bill Payment System (BBPS) a tiered structure for operating the bill payment system in the country under a single brand image, • (h) Unified Payments Interface (UPI)which is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments, • (i) Bharat Interface for Money (BHIM) which is an app to make simple, easy and quick payment transactions using Unified Payments Interface.

NPCI’s Unified Payments Interface (UPI) • NPCI’s Unified Payments Interface (UPI) powers multiple bank accounts into a single mobile application (of any participating bank), to offer seamless fund routing & merchant payments. • Bharat Interface for Money (BHIM) app enables the user to make simple, easy and quick payment transactions using Unified Payments Interface (UPI) through Mobile number or Virtual Payment Address (VPA). 7.4 Unified Payments Interface (UPI)

• Unified Payments Interface (UPI) was introduced by the Reserve Bank of India via the National Payments Corporation of India in 2016. It is gaining popularity and looks best suited to enable frictionless transfer of money. • UPI not only allows funds to be sent from one account directly to another, it is also interoperable. Main features of UPI

• Immediate money transfer through mobile device round the clock 24*7 and 365 days • Single mobile application for accessing different bank accounts • Single Click 2 Factor Authentication • Virtual address of the customer for Pull & Push • Raising Complaint from Mobile App directly Steps for Registration

• 1.User downloads the UPI application • 2.User creates his/ her profile • 3.User goes to “Add/Link/Manage Bank Account” with the virtual id. Generate MPIN

• User enters last 6 digits of Debit card number and expiry date • User receives OTP from the Issuer bank on his/her registered mobile number • User enters OTP and enters his preferred numeric MPIN Performing a UPI Transaction

• A. PUSH – sending money using virtual address • 1.User logs in to UPI application • 2.After successful login, user selects the option of Send Money / Payment • 3.User enters beneficiary’s / Payee virtual id, amount and selects account to be debited • 4.User gets confirmation screen to review the payment details and clicks on Confirm • 5.User now enters MPIN • 6.User gets successful or failure message

PULL – Requesting money • 1.User logs in to his bank’s UPI application • 2.After successful login, user selects the option of collect money (request for payment) • 3.User enters remitters / payers virtual id, amount and account to be credited • 4.User gets confirmation screen to review the payment details and clicks on confirm • 5.The payer will get the notification on his mobile for request money • 6.Payer now clicks on the notification and opens his banks UPI app where he reviews payment request • 6.Payer then decides to click on accept or decline • 7.In case of accept payment, payer will enter MPIN to authorize the transaction • 8.Transaction complete, payer gets successful or decline transaction notification • 9.Payee / requester gets notification and SMS from bank for credit of his bank account

Unified Payments Interface (UPI) FAQs • UPI is an instant payment system • UPI-PIN in the BHIM app is a 4-6 digit pass code to authorize all bank transactions • Banks issued MPIN is different from the UPI-PIN • Payment Address is an Address which uniquely identifies a person's bank a/c. • Provides for a P2P Pull functionality • Customer needs to register with his/her PSP before remitting funds using UPI and link his accounts. • Customer cannot link a wallet to UPI, only bank accounts can be added • Funds would be transferred on the basis of Virtual ID Different channels for transferring funds using UPI • Transfer through Virtual ID • Account Number + IFSC • Mobile Number + MMID • Aadhaar Number • Collect / Pull money basis Virtual ID

UPI - Benefits to the Ecosystem participants : Banks • Single click Two Factor authentication • Universal Application for transaction • Leveraging existing infrastructure • Safer, Secured and Innovative • Payment basis Single/ Unique Identifier • Enable seamless merchant transactions

UPI - Benefits to the Ecosystem participants: Customers • Round the clock availability • Single Application for accessing different bank accounts • Use of Virtual ID is more secure, no credential sharing • Single click authentication • Raise Complaint from Mobile App directly

UPI - Benefits to the Ecosystem participants Merchants • Seamless fund collection from customers - single identifiers • No risk of storing customer’s virtual address like in Cards • Tap customers not having credit/debit cards • Suitable for e-Com & m-Com transaction • Resolves the COD collection problem • Single click 2FA facility to the customer - seamless Pull • In-App Payments (IAP)

7.5 Bharat Interface for Money (BHIM) • Bharat Interface for Money (BHIM), was launched by the government in 2016. • This mobile app is developed by National Payments Corporation of India (NPCI). BHIM APP is available in play store (for android User) and App Store (for Apple User) • Designed to enable the user to make simple, easy and quick payment transactions using Unified Payments Interface (UPI). • User can make instant bank-to-bank payments and pay and collect money using just Mobile number or Virtual Payment Address (VPA). • Money can be transfered directly between accounts that are linked to the Aadhaar number, which will help to authenticate users through stored biometric records. Main features of BHIM app

• 1.Send Money: User can send money using a Virtual Payment Address (VPA), Account Number & IFSC, Aadhaar Number or QR code. • 2.Request Money: User can collect money by entering Virtual Payment Address (VPA). Additionally through BHIM App, one can also transfer money using Mobile No. (Mobile No should be registered with BHIM or *99# and account should be linked) • 3.Scan & Pay: User can pay by scanning the QR code through Scan & Pay & generate your QR option is also present.

Main features of BHIM app contd.

• 4.Transactions: User can check transaction history and also pending UPI collect requests (if any) and approve or reject. User can also raise complaint for the declined transactions by clicking on Report issue in transactions. • 5.Profile: User can view the static QR code and Payment addresses created or also share the QR code through various messenger applications like WhatsApp, Email etc. available on phone and download the QR code.

Main features of BHIM app contd.

• 6.Bank Account: User can see the bank account linked with his/her BHIM App and set/change the UPI PIN. User can also change the bank account linked with BHIM App by clicking Change account provided in Menu and can also check Balance of his/her linked Bank Account by clicking “REQUEST BALANCE” • Language: Up to 8 regional languages (Tamil, Telugu, Bengali, Malayalam, Oriya, Gujarati, Kannada ,Hindi) available on BHIM to improve user experience. • 7.Block User: Block/Spam users who are sending you collect requests from illicit sources. • 8.Privacy: Allow a user to disable and enable mobilenumber@upi in the profile if a secondary VPA is created (QR for the disabled VPA is also disabled).

HOW TO USE BHIM APP?

• Step 1: Download and Install BHIM app from Google Play store/Apple App Store. • Step 2: Select your preferred language. • Step 3: Select SIM card which has the mobile number registered with your respective bank. • Step 4: Set the application passcode required to enter the app. • Step 5: Link your bank accounts using bank account option. • Step 6: Set your UPI PIN by providing last 6 digits of debit card and expiry date of debit card

• Step 7: Automatically mobilenumber@upi will be your default virtual payment address • Step 8: Set one virtual payment address (VPA) as a primary (default) virtual payment address (VPA) (Eg. name@upi can be primary virtual payment address (VPA) making it easy to share with others). • Step 9: Click on send and enter the virtual payment address (VPA)/Account number+ IFSC/Aadhaar number and Scan or Pay option of the person to whom you want to send money. • Step 10: Enter the UPI Pin you set earlier to authenticate the transaction. • Step 11: Check transaction history to see the status of the transaction.

IMPS

• IMPS offers an instant, 24X7, interbank electronic fund transfer service through mobile phones. • Aadhaar enabled payment system AEPS allows online interoperable financial inclusion transaction at PoS (MicroATM) through the Business correspondent of any bank. • Unstructured Supplementary Service Data(USSD) transmits data over GSM networks

Digital payments industry in India will grow 10 times • A Google-BCG report says digital payments industry in India will grow 10 times to touch $500 billion by 2020 and contribute 15% of GDP. • The Governments role in fostering quick adoption of digital payments is assuming great importance. • The Goods and Services Tax implementation will inspire the business units to digitize its business transactions with vendors, suppliers, customers and partners in order to further automate the digital payment with the muscle of technology solutions provided by fintech. More choice and convenience to users • BHIM (Bharat Interface for Money), UPI, AEPS, QR code, USSD and other emerging technologies such as sound waves, blockchain and chatbots have the potential to disrupt the existing payment system. • An open access platform which allows for interoperability among wallet operators (with industry- standard quick response, or QR, code) will give more choice and convenience to users. • Consumer readiness to adopt digital payments has created positive trends toward less cash economy. 7.2 Digital Wallets in India

• Various types of digital wallets companies have mushroomed • 1.Airtel Money • 2. QuikWallet • 3. Razorpay • 4. Ezetap • 5. Freecharge • Airtel became the first digial wallet service company to launch a payment bank . • Paytm, the digital wallet service was recently converted into the Paytm Payments Bank Skills required for working in Digital wallet space  Strong understanding of payments domain and entire Infrastructure  Strong understanding of the regulatory requirements  Analytical sense and intuition relating to customer transaction behavior  Expertise in developing the use cases for the Mobile wallet platform and creating single click checkout experience  Hard skilled in functional & technical requirements  High level of interest and passion for providing consumer delight Digital Wallets abroad

• 1. WellsFargo wallet • 2. Adyen wallet • 3. Alipay wallet • 4. American Express wallet • 5. Android Pay wallet • 6. Apple Pay wallet

7.3 Direct payment systems

• Direct payment systems such as Unified Payments Interface and BHIM app may score over intermediaries such as mobile wallet and plastic money companies. • Direct payment systems facilitates money transfer directly from an account to complete a payment, unlike wallets which is two step process. Money needs to be sent to the wallet company in the first step and only then payments can happen in the second step. •Thank You