To help drive further growth of the Unified Payments Interface (UPI), the National Payments Corporation of India (NPCI) is now working with Amazon and Flipkart to enable online payments only after the product is delivered. This would be achieved by using an escrow-like mechanism, said two sources aware of the matter.
Like cash-on-delivery, under this arrangement, the money will be credited to e-tailers only after the delivery is confirmed by the consumers. At the time of purchase, UPI would create the escrow-like account where the money for the order would be parked.
This comes at a time when, in a first, UPI saw its transaction volumes falling for two consecutive months in April and May since its launch in August 2016. From 799 million transactions in March, UPI saw 781 million and 733 million transactions in April and May, respectively.
The new mechanism would take another six-eight weeks to be rolled out, but the idea is to gain the trust of non-adapting online users who still pay online via debit cards or mobile wallets, a person aware of the goings-on said.
“This is part of the UPI expansion plan, which now needs to be taken to more users. E-commerce sees a lot of users and if they start using UPI for these payments, it would broaden the overall user base. They, consequently, would also use this instrument for other online purchases,” the person mentioned earlier said.
Emailed queries sent to NPCI and Flipkart did not elicit any response. “We do not comment on what we may or may not do,” an Amazon India spokesperson said.
If implemented, this would also increase the volume and value share of UPI payments to merchants, since e-commerce payments are in the range of Rs 1,500-2,000 on an average across leading platforms. So far, at least 80% of transactions on UPI are for peer-to-peer payments. “The health of the transactions is improving now as incentives alone are not a trigger any more. The average size of transactions is increasing as well,” the person added.
NPCI is also pushing for retail investments in IPOs through UPI, which has been deferred to July 1 by capital markets regulator Sebi. Mobile wallets, in comparison, are seeing smaller scale of monthly volumes, but they are still growing. Most companies on UPI have been pushing its users to migrate from e-wallets, but a certain user base continues to use e-wallets, industry sources said.
“Especially for small payments, people are using e-wallets and the RBI extension for e-wallet know your customer (KYC) has helped as well. Some of the e-wallet users are yet to be comfortable with UPI’s operational style,” another person in the payments industry said. In February, the central bank gave a six-month extension to e-wallet players to get full KYC details of consumers.
The competition in UPI is intense unlike e-wallets, where Paytm has got a substantial lead over others like MobiKwik or Freecharge. PhonePe, GooglePe and Paytm are the top three UPI players with narrow margins, sources added.