Indian society had gone through various tides of changing economic structures - from an era where there was a fair level of equality between classes to a time when the lower classes faced increased hurdles on participation in the formal economy. Today, the economic divide in India is quite perceivable.
For instance, the Oxfam survey reveals that the wealthiest 1% of the population controls 50% of the wealth of the county, whereas only 1% of the wealth is in the hands of the bottom 50%. An economic divide this drastic is seen in only one other country in the world, South Africa.
To further display the disparity in societal classes, India makes the list of the top 5 countries for both the maximum number of billionaires as well as the maximum number of people living in poverty.
Given the above pieces of information, introducing the populace of India to new and innovative payments infrastructures is touted to be a game-changer that boosts participation of all economic classes in the country.
Thanks to the participation of the Indian government in driving new payments platforms forward and the bright talent that brings these initiatives to fruition, the landscape seems to be shifting towards a technically advanced infrastructure that is conducive to narrowing financial barriers on the poor and making digital payment technology more inclusive.
The current landscape of India's payment structure
Over the last few years, mobile payment infrastructure has undergone massive improvements concerning availability and prominence over non-digital forms of currency. This includes types of mobile banking on a desktop, smartphones, and mobile wallets such as PayTM and PhonePe.
This can be attributed mainly to the fact that smartphones are becoming ubiquitous in the Indian market and businesses are offering options of digital payment more readily as consumers move towards electronic transactions. The ease of holding assets in mobile wallets adds tremendous convenience over cash transactions which could require frequent trips to ATMs.
What is UPI payment?
As India doubles down on its ambitions of embracing the cashless revolution, we see the advent of new technology - the Unified Payment Interface - that allows individuals to utilise their smartphones as virtual debit cards to carry out instant transactions.
UPI was launched in 2016 and can be thought of as an identity card for financial transactions. Using IMPS (Immediate Payments Service), UPI allows you to send and receive money using unique identifiers called Virtual Payment Addresses. This removes the hassle of carrying debit or credit cards or trading details like bank account numbers or IFSC bank codes.
UPI allows 24x7, instant money transfer between accounts of different banks - achieving the goal of interoperability. You can operate all your multiple bank accounts through a single UPI app and can add payees immediately. This contrasts with typical bank transfers that have a waiting period for new payees to get added.
Guide to UPI - Setting up and using it for transactions
There are multiple UPI apps that you can download on the major smartphone app marketplaces including iOS and Android. To sign up for the service, you must first get a UPI app such as the BHIM Kotakpay app, ICICI’s iMobile, SBI Pay or HDFC Mobile (you are not restricted to using just your bank’s app) and register as a user.
As part of your registration with the app, connect your bank account to UPI and set your UPI PIN. This is a 4 to 6-digit passcode that you use to authorise transactions, which adds a layer of security to the mechanism.
As opposed to a mobile wallet, the UPI app does not require you to transfer money into it from your bank account. Instead, it directly debits and credits amounts into your linked account.
To use the app to initiate a transaction, open the app and specify a receiver using their virtual payment address. Enter the amount, confirm the deal using the UPI PIN and voila - the funds get immediately transferred!
With the clear ease and convenience that the UPI platform brings to peer-to-peer payments and transactions, it comes as no surprise that the adoption of UPI among the Indian public has been seeing a steady rise over the past few months.
In addition to being used to pay for goods and services from merchants, UPI is also a convenient method of transferring funds between people (subject to daily and per-transaction limits, which vary from bank to bank) where the sender only needs to know the virtual payment address of the receiver.
How is Kotak revolutionising digital payment?
The Kotak 811 app is Kotak Mahindra’s contribution towards streamlining the process of payments for the Indian market.
With a Kotak 811 savings account, you have the benefit of mobile payments using a virtual debit card for convenient, quick transactions on-the-go. For the ultimate security of users, Kotak 811 comes with 2-factor authentication to minimise breaches and ensure trust from account holders.
To sign up and take advantage of its benefits, just install the app on your smartphone, enter your Aadhaar and PAN details and you will be on your way!
Being a zero-balance account that provides a 6% interest per annum, the app can be used in tandem with your UPI app to receive benefits from both platforms.
With platforms like PayTM and PhonePe bringing more consumers to the world of digital payments and initiatives like UPI to reduce the barrier to entry and make the payment infrastructure stronger, the future of digital payments in India looks promising.
With the ease of setup, built-in security and availability across smartphones and various banks, UPI seems to be well poised to see massive adoption by Indian consumers.