Let us start with the fundamentals as in why UPI came into
picture and what is so sassy that it has been the talk of the town in India’s
payment industry! What is so revolutionizing about the payment system? How even
other countries are prying on it to replicate similar model for themselves?
I hope you would have heard at some point of your time
earlier about Bharat QR (Quick Response).
So, what was the product proposition of
Bharat QR?
- While at times when physical cards were the only mode of payment at the merchant outlets, thereby leading to too much dependency, RBI (Reserve Bank of India), and NPCI (National Payments Corporation of India) felt the need to innovate in the digitization of online payments.
- POS machines were more capital intensive and high MDR (Merchant Discount Rate) was charged to the merchants.
- With the gradual increase in the smartphone penetration, it was a need to find a mobile-based acceptance and interoperable solution of payment without any requirement of infrastructure.
- Earlier, VISA came up with its own QR code solution as M-VISA. Later MasterCard came into picture with its own QR code solution as Master Pass and e-wallets came up with their separate QR codes. However, these QR codes were closed loop QR codes, which means that someone having an M-VISA Application can make payment with the QR code of the merchant registered with M-VISA associated bank.
- Hence, to introduce an interoperable QR code, NPCI, in partnership with MasterCard, VISA, and AMEX came up with solution of Bharat QR code, which was available for Banks to integrate in their mobile banking application.
- This mode of payment facilitated instant transfer in a more secure way with the need to keep credit/debit card at home post one time linking in the bank’s mobile banking application.
What type of transaction was it considered
then?
It denoted a
digital POS (Point-of-Sale) transaction wherein establishment of a physical POS
terminal was not required.
Now, you
might also have the doubt that what about the usual POS transactions then?
Well, POS
transactions are Pull based transactions wherein the Acquirer initiates the
transaction. It is a base-II file, i.e. DMS (Dual messaging System).
Bharat QR
code transactions are Push based transactions wherein the Issuer initiates the
transaction. It is a base-I file, i.e. SMS (Single Messaging System).
I can get
that all went up in the air. Well you can google them for a basic understanding which aren't required much though.
How did it even work? What was the customer
journey?
Customers need
to install any Bharat QR enabled mobile banking application in their handheld
devices. Few examples of mobile banking applications live with Bharat QR are:
- - ICICI pockets
- - SBI Yono
- - HDFC Payzapp
- - IndusInd Bank Indus mobile, etc.
As stated in
the image, customers need to register their debit/credit card credentials in
their Bharat QR enabled mobile banking application.
Similarly,
QR code for merchants can generate their Bharat QR code with their respective
Acquiring banks.
Customer journey:
How did the functional
flow looked like?
Can you tell me what the
downside to it was?
- It is exclusively card based payments acceptance method only meant for card-to-card transactions.
- The issuing banks need to integrate themselves with the networks (As described above) individually in their Switching system in order to accept any payments.
Now, with such limitations, UPI came into picture with much
simpler payment mode wherein the amount directly remits and transfers itself
from A2A (Account to Account). No fuss with issuing banks for any
certifications with each of the specific networks. Isn’t that interesting?
Well, I am not emphasizing more on the core features of UPI as it’s known to
all about it’s “the most” preferred way to purchase/remit funds. The high-level functional diagram is just below as a reference to relate why it is
better than the Bharat QR.
UPI QR code is a combination of Account number + IFSC code. For the first time after installation
of the UPI PSP Application:
- The customer need to register themselves with their mobile number linked to their bank accounts
- debit card details for an authentication sake in any of the UPI PSP (Payment Service Provider) applications
- Set up their UPI PSP PIN and UPI PIN as 2FA (two factor authentication- typically a passcode thereby guaranteeing an enhanced layer of security by entering the PIN twice for any transaction to go through).
Now, coming back to the diagram, which swayed in the midst
of some other portion:
Therefore, this is it! You can see that nowhere the certification
for networks (VISA, Rupay, etc.) is involved. All that happens in the entire
journey is the customer's account is debited and the merchant’s account is
credited.
Now you can let me know through your comments that which one
would you prefer. Is it Bharat QR or UPI? Share it with your fellow mates who
are into the role of PM/aspiring to be PM in financial services if found it
worthy. Next article would be on excerpts of UPI 2.0 that is popularly used and
way forward to what new has been done!
Credits to the article: my
previous manager, Mr. Santosh Mohanty (https://in.linkedin.com/in/mohantysantosh) who mentored us while working with him.
2 comments
Click here for commentsWow cool..
ReplyVery Nice 👍
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