Although UPI—just a few weeks away from launch—is expected to change the banking and mobile wallet landscape in the country with 24/7 convenient money transfers, Nandan Nilekani has sparked off another debate in a recent report of Credit Suisse.
Nilekani believes that for UPI to really pick up, one needs Aadhaar-enabled smartphones. Although the country still has a large share of feature phones, the smartphone market is projected to reach 700 million by the end of 2020.
Aadhaar-enabled smartphones would be a step forward for payments, with the country getting a technology that is proprietorship of firms like Apple.
The smartphones would allow users to process payments using retinal scanners or fingerprint scanners on their smartphones.
While banking apps still require customers to enter mPIN to access their accounts via an app—though, this is also changing with IndusInd introducing fingerprint banking—UPI would just require a fingerprint or iris scan for transactions to be processed.
A report by Akamai and Nasscom highlights that fintech market is expected to grow 1.7x between 2015 and 2020.
Though Aadhaar-enabled smartphones will still take a few years to materialise as the government would need to address security and privacy concerns on transfer of data and would have to convince mobile phone makers to incorporate their chips, they would certainly accelerate fintech growth in India.
FE takes a look at how the Aadhaar-enabled smartphones will work with UPI using two scenarios. In the first scenario, a person X has an account with ABC bank and wants to make a transfer to person Y who has an account with DEF bank.
Person X through mobile app using the UPI will type in Y’s id y@defbank and the amount to be transferred, in this case R500. But, instead of entering an mPIN, as would be done in standard UPI to confirm the transaction, the person will use the fingerprint scanner or iris scanner to confirm the transaction.
Once confirmed via the Aadhaar-enabled chip connected to UIDAI server the bank will transfer the money bringing down the process to one click two factor authentication.
In the second scenario, person Y via his mobile app can request a transfer or collect R500 from person X.
In this case X would get a message that person y is requesting a transfer. All that X will do is to confirm the amount and use the finger print or iris scanner to transfer the money.
ishaan.gera@expressindia.com
