For long, the Centre and the Reserve Bank of India have been fighting a pitched battle to push Indian citizens to use less physical cash, and transition to banking channels or electronic platforms for their monetary transactions. But these efforts have met with limited success, with cash still accounting for nearly half of all transactions by value. The Unified Payment Interface (UPI), powered by the National Payments Corporation of India, is yet another attempt by the RBI to try and migrate citizens to the electronic mode. UPI essentially leverages on the know-your-client details or Aadhaar number already shared by customers with their banks, so that users can receive as well as initiate payments through a unique ID mapped to a mobile application.
The UPI has two distinct advantages for users over existing payment platforms. One, users no longer need to share personal credentials (which can be misused) such as address, bank account number and credit/debit card details with vendors whenever they make one-off payments. Two, as customer details are pre-verified by the bank, the authentication process is quick and seamless, with a single click enough to ensure two-factor authentication for any transaction. The widespread adoption of UPI can certainly prove game-changing for e-commerce businesses. The minuscule proportion of Indians holding credit or debit cards, and the general reluctance to share card details online for fear of ID theft, have been major stumbling blocks to consumers taking to online shopping in a big way. UPI, by obviating the need for sharing user credentials on each transaction, may partly address these fears.
However, it would be unrealistic to assume that mere ease of use will persuade millions of consumers to abandon cash transactions for online payments. As mobile payments have grown by leaps and bounds in the last five years, so have the instances of cyber-crime. An Assocham study in 2015 found that reported instances of cyber-crime had doubled every year since 2011. But users of banking services still lack clarity both on the extent of liability and legal recourse available to them in the event of losses due to cyber-fraud. They also lack a fair and speedy dispute resolution mechanism. Recent news reports have highlighted instances — both of security loopholes allowing hackers to withdraw large sums from customer accounts in a PSU bank, and of hackers tapping into the mobile wallet applications of private banks using duplicate SIM cards. In the absence of a clearcut legal framework, service providers have the tendency to either attribute fraud to customer negligence, or hush it up to avoid damage to their brands. Neither serves consumer interests. The RBI has been suggesting a separate statute and an insurance cover that safeguards diligent consumers from the consequence of cyber fraud. This initiative needs to move hand-in-hand with payment innovations such as the UPI for Indian consumers to gain confidence in a cashless economy.