Plastic cards may soon go out of fashion

Very soon, carrying multiple plastic cards may be unnecessary when you go shopping as your mobile phone would be all you need to transact. The National Payments Corporation of India (NPCI) and software product thinktank ISpirt are ready for the technical launch of a new Unified Payment Interface, that would allow people to people or P2P transactions from any bank account to another, using a mobile phone app.

Infosys co-founder Nandan Nilekani, who is now an advisor to the NPCI, told The Hindu that this inter-operable mobile payments system would revolutionise the way P2P payments are made.

"Think about it as introducing the equivalent of the roaming facility for mobile phones, for your bank account," Mr Nilekani said, adding that eventually the system would allow mobile to mobile payments (without any bank accounts involved) and payments to an Aadhaar number or a virtual address if people are not comfortable sharing their bank account details.

The Unified Payment Interface (UPI) project was initiated last February by Reserve Bank of India governor Raghuram Rajan, and over the past year, the application program interface (API) has been developed that allows payments from any bank account to another.

The technical launch of the interface, built on an open source framework, is in Bangalore on Saturday. Over 500 representatives from startups, banks, and venture capital funds keen on exploring possibilities it throws up for new applications, are likely to attend.

“The UPI is a new layer on top of the IMPS (Immediate Payment Service) that has been used by banks for electronic fund transfers for about five years. This will allow seamless, inter-bank connection using a mobile app that can be used to pay merchants as well as make other ‘proximity payments’ on an offline basis,” said Mr Nilekani, who is the mastermind behind Aadhaar and was the first chairman of the Unique Identification Authority of India.

“There is a very simple API that would provide for both push and pull payments. So I can send money to you or you can send me a request to pay, as merchants may do if I buy something from them. I can approve the request on my phone,” Mr Nilekani explained.

“This is a big leap from the old system for credentials, where you give your card to the merchant and there is a security risk. In this model, everything happens through your own phone, your credentials are established and payment is approved,” he said, adding that many new phones come with biometric iris or fingerprint scanners so Aadhaar authentication is possible on these devices.

“A billion people can use this, it’s completely open so it is critical for India’s digital independence. We saw in the net neutrality debate that increasingly, you will end up with large players becoming gatekeepers. With an open stack, even a two-person startup in a garage can create a payment product as good as Apple Pay,” he stressed.

Mr Nilekani expects a billion people to have Aadhaar numbers by this March or April (from 970 million as of now) and said the entry of 21 new banks and the surge in smart phones and bank accounts offers the potential to build all sorts of apps.

“The UPI has a level playing field with no gatekeepers. We can use it to fundamentally change the way we do business or improve any government service or process,” adding that the UPI could do to P2P transactions what direct benefits transfer has done for government to people transactions.