60. The book, e-RUPI and updates
Here I am after a long gap… I hope all of you took at least one dose of vaccination. Stay safe and as they say ‘we are not safe until we all are safe’.
Let me start with an important update…
Finally I was able to ‘tick’ mark one item in my bucket list — ‘write a book’.
I have authored the book ‘Auth N Capture — Introduction to India’s Digital Payments ecosystem’.
I have restructured the content of blog, added additional details and have a surprise in the final chapter.
Now that I am done with the book… let’s move on to products and updates.
A. RBI DPI
I can run 100 meters in 25 seconds and with some practice, I can run in 20 seconds… but, the real question is, “is it good?”
Yes-it is good, if you compare my timing with a toddler but NO- if you compare it with Usain Bolt.
So standalone numbers do not have much value… ‘Benchmarking’ is important to understand the significance of that number.
If you are done reading about DPI, then here are the DPI numbers:
Fancy… isn’t it?
But these numbers are not telling anything except that there is improvement compared to the previous period and I keep wondering “Number is good but is it good enough?”
Another product by NPCI, built on UPI rails and prepaid in nature and mainly aimed towards bringing the people who do not have bank a/c or smart phones (with data). Already enough has been written about it by FinTech experts, influencers, newspapers and anyone who ever did a single UPI transaction. It is not necessary for me to write, but again, I don’t want to feel FOMO… :) So here you go.
- Stopping leakage (aka corruption, bribing) in direct benefit transfers
- Large section of our society is unbanked (do not have a bank account) or smartphones (need to include them in the financial inclusion story)
- On the way, find some innovative use cases for corporates
- Purpose code: This is something new to me (I learnt something new!). Then I realised that UPI has a concept of purpose code (e.g., UPI One time mandate has purpose code ‘01’)
- Visa, MasterCard and RuPay have MCCs and I noticed that 8493 (COVID care service) is not there. NPCI created a new MCC for this purpose (Unprecedented circumstances need unprecedented MCC!)
Settlement and Commercials:
- e-RUPI will follow standard settlement process of UPI (Issuing Bank — NPCI — Acquiring Bank — Merchant)
- There will be some commercials for B2C cases but I couldn’t find any (will update this section)
Looks like e-RUPI is designed for Direct Benefit Transfers (e.g., COVID Care, Fertiliser subsidy etc.) and it has other applications too. Example: Fleet operators can create vouchers and share with truck drivers that can be redeemed in petrol pumps.
Considering e-voucher is on-time usage only, it is not ideal for incentive payout or even gifting. Think of it, you have to use the entire load amount in single go, any residual amount cannot be used (and will go back to sponsor entity 3 days after expiry date)
The moment people saw e-RUPI, they assumed it was the first step towards India’s own CBDC (Central Bank Digital Currency). Sorry, it is not. It is just a prepaid voucher that runs on UPI. If India ever comes with its own digital currency then it will be called “e-Lakshmi” (wanna bet?)
All in all, I would say such innovations are important as they make the domain vibrant and dynamic.
C. Prepaid Cards
My career in payments (2012–13) started with prepaid cards… but prepaid cards didn’t work for many reasons and ultimately, mobile wallets stole the thunder.
Do you know, so far 25+ companies have surrendered their PPI licenses.
Fast forward 2020–21:
And this time around prepaid cards can be successful:
- Separate KYC norms based on load value (Min KYC up to Rs.10,000 and Full KYC for above Rs.10000)
- Digital KYC (CKYC, Video KYC etc.)
- Smart phone and data
- Wider acceptance network and spending options
- Virtual card on App (can save costs related to physical card)
- Various use cases that goes beyond incentive payout and gifting
The most prominent use case for prepaid cards is lending… Yes, prepaid cards can be used to disburse lending amounts (instead of depositing the loan amount to the bank account, load the prepaid card).
Why prepaid cards for lending?
- Card is branding instrument (tangible)
- Just in time funding models that help companies to manage funds efficiently
- Not just banks, even PPI licensed companies can provide BIN for prepaid cards
- Easy to launch co-branded cards
- Customer doesn’t have to pay interest unless amount is utilised (Better for customer)
- Earn share in issuer interchange (finally, now we are talking).
Note: (1) Prepaid interchange is the same as credit card interchange (2) Interchange is the commission that is earned by the issuing entity (bank or PPI). Interchange + markup = MDR (merchant discount rate)
While everyone is looking at prepaid cards in a new way, our good old LIC also launched a Gift Card (along with IDBI Bank).
Seriously LIC… a gift card?… a gift card? (one more time for effect)
But again, the grand old uncle of the Insurance sector is behaving like an old uncle… give gyan about ‘jeevan anand’ and give gifts (money) to kids on festival days :)
D. Mobile Recharge on BBPS
As we are on the topic of prepaid, let’s discuss another type of ‘prepaid’ thingies — Prepaid mobile…
Was it not there on BBPS already?
The foundation of BBPS is bill fetching — there should be a bill that should be staged by the biller and then it can be accessed and paid through agent channels (PhonePe, Google Pay, Bangalore One etc.). The bill can be anything — utility bills, loan repayment, school fees etc.
But, prepaid mobile connections do not have bill generation, so prepaid mobile recharges were not on the BBPS platform (Not even on BBPS’ earlier model — EBPP). So any agent who wants to do a prepaid recharge, will have to do separate integrations with platforms who facilitate prepaid mobile recharges (e.g. Euronet).
Why is it blog-worthy?
Roughly 95% of mobile connections are prepaid. Although the value of these ticket sizes are small (compared to postpaid), the number of transactions will be huge.
E. Strike Three:
MasterCard didn’t adhere to data localisation guidelines of 2018. (Basically, payments data should reside in India).
MasterCard cannot issue new cards but existing cardholders won’t be affected. So any bank or FinTech which is completely relying on MasterCard branded cards needs to find an alternative. If you are a FinTech professional then you would have seen below table (if not then good for you)
Why didn’t MasterCard work on data localisation? And why did the RBI block three MNCs (Amex, Diners and MasterCard)?
Is it possible that the RBI wants to promote the homegrown RuPay or is it possible that MasterCard thought that they can get away without adhering to guidelines.?
There is no conspiracy or anything… Data localisation is not a simple task for MasterCard like companies. They just couldn’t meet the deadline. This is just a temporary block and everything will come back to normal in a few months and meanwhile, RuPay and Visa have gained some market share (as they say, show must ‘go on’)
Note: On a positive note, HDFC bank can resume issuing new credit cards (yeah, the bank was also asked to stop issuance of new credit cards).
F. Other updates:
- ‘Did you buy Zomato shares?’ — became the second common question after ‘did you take vaccination?’. (My Ans: Yes for Vaccination, No/Never for Zomato shares).
Oh…btw.. Zomato floated a payments company. Maybe it wants to stop the growth of DotPe who is going after restaurants. Long ago (2014), Flipkart also floated payments company (‘PayZippy) but didn’t succeed. Let’s see if history repeats itself or Zomato will do something awesome here!
- Centrum and BharatPe bought PMC Bank. News of these new-gen companies buying a bank is overshadowed by BharatPe offering BMW Bikes to engineers. (overcompensating… are we?)
It is really great to see companies progressing from offering free food to free fancy bikes… Companies that were limited to blogs are now on the front page of newspapers (Don’t think too much.. One more round of funding and they will buy that newspaper… ha.. ha)
- PolicyBazaar gave up its web aggregator licence and moving to brokerage model to sell insurance offline (and we thought digital is future!)
- Did you miss the digital train? Never mind, if you have enough money then ‘buy’ digital companies. That is what Tata and Adani are upto. (A true build vs buy model)
- After the SI Hub of BillDesk, RazorPay launched Mandate HQ for ‘standing instruction on Cards’. Both platforms are still incomplete (yet to add all types of cards and banks). Deadline for adhering to the new SI on cards guideline is 30–09–2021…let’s see what RBI does this time? (extend the deadline again?) and what PAs will do? (cut the corner and offer the older solution to merchants?).
- RBI finally clarified that it will respect the Supreme Court order about Crypto Currencies. Still, banks are not offering their services to crypto exchanges.
Is it the beginning of a new beginning, or the end of a new beginning or the middle of a new end? (Who cares..?? I do.. My 10K is stuck with one of those crypto exchanges and I am hoping it will grow to 1 Crore soon.. Ha ha.)
Overall, it looks like every company wants to do everything… The eCommerce company now has a BNPL product, a payment aggregator wants to be Neo-bank, a Neo-bank wants to be WealthTech and a WealthTech wants to become a payments company and for some reason, everyone wants to do ‘lending’.
That reminds me of this song… I couldn’t think of anything better than this video to end this blog… enjoy!