Post on 23-Jan-2017
Trends in Banking(Part-VII)
National Payment Corporation of India launched Unified Payment Interface
(Next future payment interface)
What is Unified Payment Interface(UPI)?
UPI, a product of NPCI is a revolution in retail
payment system allows for instantaneous fund
transfer via a SMARTPHONE using single-click & 2-factor
authentication
The UPI platform can be used for
- e-commerce transactions
-Fund transfer to family
-Purchase of train tickets
-over-the-counter payments-donations
-school fees among others
UPI provides an enhanced layer of
security, i.e, customers won’t
have to share bank account details only
a virtual payment address provided by
a bank or an Aadhaar
number(which is tied to a bank
account)
How UPI Platform works?
1.Mr.X finds a leather sofa on a e-commerce portal that cost Rs.20,000
2.During check-out, Mr.X provides his virtual
payment address given by his bank
(x.444@hdfc)4.UPI routes
request to Mr.X ‘s virtual
payment address
through his bank
5.Mr.X’s bank notifies
him of ‘collect
request’ from vendor. Mr.X
confirms it & proves
his credentials
3.E-commerce portal initiates “collect request” for
Rs.20,000 along with order number to UPI via its bank
6.Mr.X’s bank Debits the amount & confirm it to
UPI which alerts e-commerce vendors bank.
Vendor gets confirmation of credit & initiates delivery of
order
In e-Commerce txns
1.Ram, a migrant worker living in Mumbai wants to send money to his wife, Lakshmi in the village
2.Ram creates SBI bank account using Aadhaar e-KYC option links it to his mobile number
3.Lakshmi opens an account in Bank of India using Aadhaar e-KYC
Ram sets up profile on SMI mobile app & integrates with
UPI In the same way Lakshmi does the same with her bank account
SBI App validates user, Debits
Ram’s account, initiates “Pay” transaction to
Lakshmi’s Aadhaar Number
UPI maps Aadhaar Number
to Bank Identification
number & routes transaction to
destination bank
Ram adds Lakshmi’s Aadhaar number to his address book(no other information needed) & enters the amount with a single click &
the money is sentDestination bank credits amount to Aadhaar-linked Account, sends confirmation to UPI which in turns confirms credit to SBI app
that notifies Ram
Fund Transfer to family
Key Drivers of UPISimplicity
An account holder will be able to send & receive money from their mobile phone with just an identifier without having any other bank/account details
All that a account holder need to do is “Pay to” or “Collect from” a payment address(such as Aadhaar number, Mobile number, RuPay Card, virtual payment
address etc)
InnovationUPI is an innovation on both ‘payee’ &
payer side.UPI App will allow application providers to;
-take advantage of enhancements in mobile devices
-integrated payments on new consumer devices
-innovative user interface features -take advantage of newer authentication
services
AdoptionThe main objective of
UPI was to have a solution that is scalable
to a billion users & enable large scale
adoption
SecurityThis is one of the key
areas of concern among users. The concept
behind UPI is not to reveal too much data like banking or other personal details. The solution is 1-click 2-Factor authentication
CostIn UPI since mobile phone
number is used as an authentication(credential capture) device, use of
virtual payment addresses & use of third party
portable authentication schemes such as Aadhaar
should allow bank’s cost to be driven down
Objectives of introducing UPI1.to facilitate next generation online
immediate payments leveraging trends such as;
-increasing smart phone adoption-Indian language interface
-universal access to internet & data2.The payments can be both sender &
receiver initiated & will be carried out in a secure, convenient &
integrated fashion
Who can use UPI?Anyone with a mobile
phone & a bank account
How is UPI different from the existing payment system?
In the present system, in order to make any txns the account holder’s bank bank account
details are required but in case of UPI all one needs is a virtual
address which is unique to you What is the level of security in UPI?
Single Click 2-Fctor authentication(with one click the txn is authenticated at two levels)User just needs a mobile phone with a mobile PIN called MPIN
& a virtual ID offered by the provider
Is virtual address unique to the user?
Virtual address offered by the provider need not be permanent.
For instance: a provider may offer “one-time use” addresses or “amount/time limited” addresses
to customers. In addition, innovative usage of virtual addresses such as “limit to
specific payees”(ex: a virtual address that is white listed only
for txn from IRCTC)-PSP’s can allow their customers
to create any no. of virtual payment addresses & allow
attaching various authorization rules to them
Level of security in UPI-Case Study
1.You have bought some goods at a mall & need to make a payment for it
2.You have to inform your virtual address to the person at the counter who enters the address in his/her system & the malls system will then send you an authentication message to your virtual address which is mapped to your mobile
3.Only after receiving the message & acknowledging it by entering your “password” is the txn completed & the amount Debited from your bank account
UPI has a single-click two-factor authentication system which means that with one click the txn is authenticated at 2 levels
Banks must exploit the situation(Its brave new world of Apps, big data, analytics, robotics & more)
There are powerful new tools at Bankers disposal such as better use of big
data & analysis. According to Accenture’s
Tech Vision, by 2020 there will be more than 44
zettabytes of data,35% of which will be considered
useful for analysis
Companies are increasingly using “Intelligent
Automation” to handle big data-machines to create
scale, speed & the agility to cut-through complexities
that humans cant duplicate
India’s banks also need to be focused on more than just offering online & mobile deposits, payments & loans. They should be going one-step further thinking outside the box just as vehicle –hailing
app companies have done
Discount brokers are already using “robotics” to expand their customer base. In 2015,Honk Kong based brokerage ‘8 Securities’ launched a robo-
advisor called “8 Now” available in Hong Kong & Japan taregeting retail investors with a minimum $
88 initial investment
India’s banks need to continue to build their basic digital services but they also need to start leveraging intelligent automation & new
technologies such as block-chain. This would be good for customers(offers them faster & better
service),good for the banks(expands their coverage) & its cheaper for everyone
Robotics is a prime example. Rob-advice may so far have only gained a miniscule share of Assets Under
Management(AUM) globally but it presents investors with a possible price reduction of as much as 70% for some services & it presents banks with new avenues to
streamline & improve services
Robotics doesn’t take away the human element-you will still need the advisor to reassure clients
through difficult markets ,persuade clients to take action & synthesize different solutions but it
potentially increases the output of the bankers
Finally its all about figuring out how robo-advice can complement & enhance
relationships
India world’s largest recipient of remittances in 2015
(World Bank)
India has remained the world’s largest recipient of remittances from abroad in 2015,despite a $ 1 billion drop from 2014,the first such decline since 2009 according to World Bank).The World Bank attributed the decline to the impact of falling oil prices on remittances from the Gulf countries & depreciation of major sending country currencies. In 2015,the country got $ 69 billion in remittances
Remittances to India constituted 2.9 times the FDI in 2014.This declined to 1.75% of FDI in 2015.Other large remittance recipients in 2015 were; China ($ 63.9 Bn),Philippines($ 29.7 Bn),Mexico($ 25.7 Bn),France($ 24.6 Bn) & Nigeria($ 21 Bn)Remittances are an important &
fairly stable source of
income for millions of
families & of foreign
exchange to many
developing countries
Remittances to Nepal rose dramatically in response to the massive earthquake there by 20.9% in 2015 V/s 3.2% in 2014.Also many migrant workers returned to take car of their families as the avg. no.of returns at the airport jumped 5 times to around 4,000 per day.
The growth of remittances in 2015 slowed from 8% in 2014 to 2.5% for Bangladesh, from 16.7% to 12.8% for Pakistan
& from 9.6% to 0.5% for Srilanka
Migrants from India are largely
concentrated in-UAE(2.3 Million)
-US(2.1 Million)-Saudi Arabia(2
Million) &-Pakistan(1.4
Million)
The 4 countries along with the
Kuwait & Qatar account for roughly
69% of total remittance flows
into India
The UAE leads the pack with transfers
through this corridor ($ 13.2 Bn) followed
closely by the -US($ 11.5 Bn)
-Saudi Arabia($11 Bn)-Pakistan($ 4.9 Bn)
-Kuwait($ 4.8 Bn) &-Qatar($ 4.2 Bn)
The top migrant destination is the US followed by Saudi
Arabia, Germany, Russia, UAE,
UK,France,Canada,Spain & Australia
India is the top emigration country with 13.9 Million emigrants followed by Mexico at
13.2 Million & Russia at 10.9 Million
The US tops the list with an estimated $ 56.3 Billion in outflows in 2014,Saudi Arabia rank the second followed
by Russia, Switzerland, Germany, UAE & Kuwait
Thousands plan Savings Account for a Holiday(Thomas Cook is allowing passengers to open a separate account for their big vacation a year later for which they will attract interest as
well as a top-up from Thomas Cook)
Thousands of people have opened “Holiday Savings Account” with different banks in the last one year to go on vacation with Thomas Cook
Thomas Cook has partnered with banks like ICICI, SBI, Kotak
Mahindra & IndusInd Bank to attract holiday lovers
Not everyone is able to fork out money at a time to go on a holiday & is becoming a necessity for increasing number
of people. Hence Thomas Cook came up
with inflation-proof holiday packages that can be used after 13
months
Thomas Cook has succeeded in opening
accounts with a total of 18,000 passengers.
The no. of accounts would be smaller as an account usually means
multiple travelers of one family or a group
If any banks are keen to partner with Thomas
Cook, they are welcome. Thomas
Cook has also set-up a Call Centre
to push sales & promote the concept
How the Thomas Cook’s Holiday Savings Account work?(A Recurring Deposit plan linked to Holiday Plan)
The cost of the holiday is split
into 13 installments but
the account holder is
required to pay the first 12
months installments
onlyThe 13th
installments comes from the interest earned
from the account & a top-up from
Thomas Cook
If the account holder changes
his mind/decides not to go on a holiday at the
end of 12 months, the money &
interest can will be returned back
to the account holder
The Holiday package is all inclusive & takes care of return airfare,
transfers, accommodation,
all meals, sightseeing &
taxes
What happens is the cost of one
or more component of the rip goes up due to increase
in airfare/FOREX
rate?Thomas Cook
takes the risk of any increase &
hence it is called inflation-proof package
Anup George RebelloAsst.Manager
The Catholic Syrian Bank Ltd(anuprebello.6@gmail.com)
http://www.slideshare.net/anuppresentations