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