Payment Solution for Feature Phone Users : Daily Current Affairs

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment,Inclusive growth and issues arising from it.

Key Phrases: National Payment Corporation of India, UPI 123Pay, interactive voice response, financial inclusion, person-to-merchant, Unstructured Supplementary Service Data.

Why in News?

The Reserve Bank of India along with the National Payment Corporation of India launched UPI 123Pay on March 9, 2022. This is a service that allows those with feature phones to use UPI.

Key Features

UPI (unified payments interface) '123PAY' is a three-step method to initiate and execute services for users which will work on simple phones.
UPI 123Pay will allow customers to use feature phones for almost all transactions except scan and pay.
It doesn't need an internet connection for transactions. Customers have to link their bank account with feature phones to use this facility.
Feature phone users will now be able to undertake a host of transactions based on four technology alternatives.
They include calling an IVR (Interactive Voice Response) number, app functionality in feature phones, missed call-based approach and also proximity sound-based payments, the RBI said.
Such users can initiate payments to friends and family, pay utility bills, recharge the FAST Tags of their vehicles, pay mobile bills and also allow users to check account balances.
Customers will also be able to link bank accounts, set or change UPI PINs.
According to a report in (Press Trust of India )PTI, there are an estimated 40 crore mobile phone users who possess feature phones.

Note:-

Interactive voice response or IVR is an automated business phone system feature that interacts with callers and gathers information by giving them choices via a menu. It then performs actions based on the answers of the caller through the telephone keypad or their voice response.

The impact of the move

UPI, as a mode of payment, has become one of the most popular methods, comprising more than half the retail payments in the country. However, the offering by NPCI is limited to internet-enabled smartphones.
Interestingly, 78% of merchant payments via UPI for the month of February were of less than Rs 500 in value, while for peer-to-peer payments, 59% were worth less than Rs 500. This points towards a trend of UPI being mostly used for smaller retail transactions.
The availability of the service on feature phones without an internet connection could help it penetrate into rural areas of the country, enhancing financial inclusion and digital adoption, while also driving payments’ volumes on the platform.
According to RBI Governor Shaktikanta Das, UPI recorded more than 450 crore transactions worth Rs 8.26 lakh crore in February 2022, almost double when compared to a year ago.
In 2022-21, the total value of transactions was around Rs 41 lakh crore. In the current fiscal, the total volume of transactions is Rs 76 lakh crore.
“This move is designed to increase digital penetration of financial services and help people at the bottom of the pyramid, who cannot afford smartphones, to participate in UPI transactions.
It will thus bring a majority of them into the digitisation fold,” Anand Kumar Bajaj, the founder and CEO of PayNearby, said. He added: “As it does not require internet connections, it will empower regional rural markets to join the digital payments bandwagon.”

Do you know?

Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions, introduced on 11th April 2016.
NPCI is umbrella organisation for all digital payments.
The interface is regulated by the Reserve Bank of India (RBI) and works by instantly transferring funds between two bank accounts on a mobile platform.

How does one use UPI123Pay?

UPI123Pay is a three-step method to initiate and execute services for users.
It includes calling an IVR (Interactive Voice Response) number, app functionality in feature phones, missed call-based approach and also proximity sound-based payments.
The missed call feature would allow phones to access their bank accounts and perform routine transactions, such as receiving or transferring funds, regular purchases, bill payments, etc.
A user just has to give a missed call on the number displayed at the merchant outlet.
The customer will then receive an incoming call to authenticate the transaction by entering the UPI pin. The scan-and-pay function of UPI, available on smartphones, is not there on UPI123Pay.

Do other countries have something similar?

Mobile payment systems that do not rely on internet connectivity like the ones based on Unstructured Supplementary Service Data (USSD) or SMS technology were introduced many years ago and are still being used in some developing countries.
In fact, one of the major mobile payment systems globally was introduced by Vodafone’s Kenyan associate, Safaricom in 2007.
M-PESA, which is Africa’s leading mobile money service, operates across the Democratic Republic of Congo, Egypt, Ghana, Kenya, Lesotho, Mozambique and Tanzania, with 51 million customers making over $314 billion in transactions per year through the service, according to Vodafone.

How does it take the UPI programme forward?

Even though UPI can alternatively be accessed through the National Unified USSD Platform using the code *99#, the process has not seen an uptick in adoption or popularity.
However, with UPI123Pay, it would reach 40 crore feature phone users in the country, potentially making a material improvement in the way they access the popular payments platform.
The RBI estimates that overall volumes on UPI will touch Rs 100 crore soon and UPI123Pay could play a significant part in it.

Conclusion

UPI has changed the game. The number of transactions through UPI is increasing exponentially because of convenient.
For banks like Gramin bank, Karur Vysya Bank many of customers are in semi-urban and rural areas and many don’t have smart phones.
If UPI is enabled for them on feature phones, they will get liberated and can transfer the money conveniently.
The launch of UPI123Pay aims to promote financial inclusion for that section of society, which was so far been excluded from the digital payments landscape.
However, experts also point out that there are concerns still over security and customer awareness and education for its mass adoption.

Sources: Indian Express

Mains Question:

Q. ‘The launch of UPI123Pay aims to promote financial inclusion for that section of society, which was so far been excluded from the digital payments landscape’. How advancement in technology is impacting the life of people in the lower strata of society?(250 words).