On Wednesday, ride-hailing company Uber is set to make a public announcement of a payment feature that it has built on top of India’s unified payments interface, or UPI, a layer of software that makes it easy to transfer money from one account to another in real time.
Uber has already rolled out the feature but at an event on Wednesday, likely to be attended by Union minister for information technology Ravi Shankar Prasad, it wants to make a big splash about it.
Uber engineers who’ve been working on the feature for nearly 6 months have been all praise for the payment interface — and that’s quite an endorsement coming from a company that collects money from millions of customers and remits money to drivers in over 100 countries.
But that’s not the big news. The big deal is the India is readying a new avatar of the payments platform: UPI 2.0. Sources tell FactorDaily that UPI 2.0, which has been talked about in the press (1,2) for more than a year now, is ready to be rolled out in about two months time.
New economy companies such as Uber, WhatsApp, Amazon, Flipkart, and Reliance Jio, as also retailers, banks and other businesses, have been waiting for UPI 2.0 and its associated features for a long time. Most of them have even been working on solutions based on UPI 2.0.
Most of the sources quoted in this story asked to stay off the record since UPI 2.0 is yet to be unveiled and the companies working on the payment interface are doing so in beta mode. Requests for comments sent to Uber, Amazon,
Google, WhatsApp, Flipkart, Reliance Jio, and the National Payments Corporation of India did not immediately get a response; we will update this story when we have them. A Google spokesperson said that the company is “always looking for ways to make it easy for people to pay with their mobile devices, such as Android Pay in some countries, and looking to expand those capabilities to the next billion users.” A WhatsApp spokesperson said that it wants to contribute to the vision of “Digital India” and that it is exploring how it will work with other companies to do that.
UPI 2.0. So what?
Let’s stick to the Uber use case to explain UPI 2.0 better. There are two sides to Uber’s payment operations — the part where consumers pay Uber for a ride and the part where the ride-share company remits money to a driver’s account.
Uber has a pretty efficient system — built on top of country-scale banking infrastructure and third party service providers — tied to its banking and financial services accounts in Amsterdam, which runs its transactions all across the world.
Depending on the country, it could take from several hours to even days to remit money to a driver’s account. For instance, if it needs to make a driver payout on Saturday, the system needs to trigger the remittance on Thursday. In India, drivers are currently paid weekly on Wednesdays for which Uber initiates a payment on Monday. On the consumer side, it takes two days for Uber to get paid if you use a card or a payment gateway to pay for your ride.
With the launch of UPI 2.0, all this is going to change in India.
The second version of UPI will have a key feature called e-mandate which many see as the real game-changer in the Indian digital payments space. The e-mandate is like a standing instruction to your bank. For instance, you could give Uber an e-mandate to deduct money directly from your bank subject to a cap of, say, Rs 1,000. This means cutting out all intermediaries like payment gateways and wallets you currently depend on.
On the driver side, Uber can make faster payments — again cutting out middlemen — and also roll out driver benefits like insurance or savings schemes through e-mandates and tie-ups with banks and service providers.
“Imagine being able to put away a little bit of money towards a savings scheme every time a driver gets paid,” one person who worked closely on the Uber-UPI integration told FactorDaily.
With that end in mind, this source said, Uber has been asking every driver to install the UPI based payments app BHIM, a cashless app of the National Payments Corporation of India (NPCI). “If there’s some secret saving that happens every day, that will be good for drivers who don’t know much about saving money,” says Shashi, an Uber driver in Bengaluru. “Many drivers..not educated..they come from the countryside and slog, slog, and slog.Uber should educate such drivers (about such schemes),” Shashi, who prefers only his first name taken, said. He hasn’t yet been asked by Uber to install the BHIM app.
The biggies queue up
It’s not just Uber that is doubling down on UPI 2.0. Instant messenger WhatsApp, payments companies such as PhonePe and Paytm, search giant Google, online retailers Amazon and Flipkart, and telecom company Reliance Jio are all in advanced stages of building payments products on top of the UPI infrastructure.
“All of them are looking at payments as an important part of their strategy globally. With UPI, it gives them an opportunity in India. Whether it’s Google, Facebook, Uber, WhatsApp, Amazon or any other global major, payments are going to be an important part of their strategy,” says Sanjay Jain, Chief Innovation Officer at CIIE, IIM Ahmedabad. Jain, who was part of the team that architected the UPI stack, declined to talk about specific plans these companies might have.
Earlier this month, leaked screenshots of WhatsApp’s developer version, showed that the company has already put in code that makes peer-to-peer payments possible on the messenger. FactorDaily has learned that the company plans to launch this feature in beta as early as next month.
A handful of engineers at the company’s headquarters in California are working to roll out of the feature in three months, sources told FactorDaily. The efforts are being led by WhatsApp’s business head Neeraj Arora, who also sits on the board of Paytm in India. Peer-to-peer payments on WhatsApp could be a big boost to small and medium businesses that already rely heavily on the instant messenger to do business. Over 200 million people use WhatsApp in India, making it the most popular instant messenger here.
PhonePe, the payments company acquired by e-commerce major Flipkart, was built mostly on top of the UPI infrastructure. As the company grows more ambitious, it has started working on newer features that enable recurring payments. UPI 2.0’s e-mandate is perfect for such use cases. Imagine paying a publisher or your milkman every month automatically without having to go through the motions of transferring funds online. Flipkart, which recently raised $4 billion in fresh capital from marquee investors, has earmarked “high double-digit millions” to invest in PhonePe, according to a source.
We have also learned that Paytm is working to roll out UPI integration by the end of September.
Among the players, Google is the most secretive of all. But that doesn’t mean it’s not bullish about the payments stack. Recurring payments and in-app purchases could potentially unlock the whole app economy for Google in India. One of Google’s biggest challenges here has been to find ways to get its developers paid.
A source said Google’s app is still six months away from launch. “It’s going to be a separate payments app and not Android Pay,” a Google executive told FactorDaily, requesting anonymity.
Amazon, which is making an ambitious payment bet in India, is also enabling UPI-based payments on Amazon Pay. The US retailer could enable subscriptions and even instant purchases using the e-mandate feature. An Amazon source told FactorDaily that the company even has plans to take Amazon Pay to Kirana shops in India. “Amazon Pay will become full-fledged payments play like Paytm or PhonePe,” the source said. The company, which recently acquired a licence to operate a mobile wallet in India, will enable recharges, utility payments and online shopping. It is likely that the company will launch features like tap and pay at physical retail stores that use Amazon Pay.
Reliance Jio, the telecom company controlled by Mukesh Ambani’s Reliance Industries, had said at its annual general meeting in July that the handsets it plans to give away for free (against a Rs 1,500 refundable deposit) will come equipped with NFC chips and the company plans to introduce payment features such as tap and go as software upgrades. A source close to Reliance Jio said: “There is a roadmap for Reliance Jio’s wallet business — both for payments bank and UPI. Jio has a partnership with State Bank of India, and the wallet business will be part of the UPI play. It will be used for all kind of payments like any other UPI-linked wallet or bank account will do.”
The 100 million goal
“If large tech companies with hundreds of millions of users in India take to UPI-based payment, the number of transactions on UPI could cross 100 million a month,” a person familiar with the NPCI’s plans told FactorDaily. UPI was launched in August 2016.
Payments based on the unified payments interface have shown a rapid uptick in the last year or so. According to NPCI data, the number of UPI-based transactions has gone from three million in November 2016 to 11.4 million in July 2017. In value terms, about Rs 33,800 crore worth of transactions went through on the platform in July 2017, as compared to Rs 900 crore in November 2016.
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Visuals & infographics: Nikhil Raj.
Update (11.36 am IST, 22 Aug 2017): Changed "Four engineers.." to "A handful of engineers..."
Update (8.28 pm IST, 23 Aug 2017): Added comments from Google and WhatsApp.
Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.