 Good morning everybody Thanks for being here. It's It's at least an early start for me. So it's good that so many folks are here So my name is Rahul. I'm from Phonpei and I'm gonna have a very short 15 minute talk on why UPI is a pivotal moment for India now How many folks here are fairly familiar with UPI given the number of questions that were asked before I guess that's a Well educated audience, okay So I'm gonna assume certain things that The audience does know a little about UPI and my conversation is my talk isn't really going to be about how UPI works There is a great talk today by Srikanth. I love the abstract It's fairly deep and all those who want to know how UPI works what the APIs are Things like that. You should attend that talk My discussion on my talk is really going to be about certain things that I believe are getting missed out in all the conversations about UPI the And the controversies right There are certain concepts or fundamental Design patterns right not just from a technology perspective, but from just the philosophy perspective that UPI brings about In respect to of whether UPI is the one that changes the payments and fintech space if these concepts resonate with people like us the banking community and Businesses I think that's a phenomenal start for the whole fintech revolution in India, right? So I'm gonna have so my slides are very few the first couple of slides are a very quick primer on UPI and I have just one slide about my conversation and it's I'll take a lot of questions at the end of it so UPI right UPI is part of a much grander plan of Digitizing India right and this is not just about payments or transactions It's it's basically about digitizing content for India it's about digitizing access to money for India and It is about bringing everybody into the digital network, right? So UPI is a very very critical component of this whole grand plan. So we have the identity through Aadhar The Jandan Yojna has ensured that everybody has a bank account those bank accounts Maybe like zero balance bank accounts, but they are basically bank accounts which is the real place money should stay ultimately right and Then you have UPI which is basically an uber layer Over the banking system that acts like a Fairly intelligent broker, right? It basically allows Identification of your bank accounts it allows address ability to bank accounts in a very easy manner and It ultimately gives access through authorization from the banks itself to your funds now. This is While there are attempts worldwide to actually build something like this So far there isn't a precedent to something like UPI which is basically a ubiquitous API layer across banks where all the major banks in a country have actually signed Be part of it, right? It speaks volumes about how we are thinking as the regulator as the banking system as Entrepreneurs and as a government right for all the flak that a lot of us give about governance being Look at this and realize that there is a grand plan that if successful can really change the landscape So what are the comparables in the world, right? So there's something called PSD in Europe, which is it's still not gone live PSD is basically the payment services director version 2 and it's very very similar in its mission as far as To UPI as far as payments is concerned, right? The idea is really to actually build a open API across the banks to bring in New companies into the payment domain to allow innovation to happen outside of the traditional banking system and actually to cut out as many intermediaries as possible, right? And there is a very open mission. It's an open statement. You guys can read about this. It isn't really live yet It has its push and pulls in terms of Which are the networks that are supporting it which are the networks that are not supporting it but it's very similar in mission, right and UPI is live in India. PSD is still on paper the US on the other hand typically like the US does not go for a regulated model of Payments right in the sense that it is pushing Open platforms across banks, but really the Innovation is happening at the bank level or it's happening at specific partnerships between fintech companies like others with very specific banks and it's fairly fragmented, right? Open API is a largely for the purpose of information consumption, but they're not really Percolating data across the ecosystem but even so I think the fastest Unbundling of financial services through the startup ecosystem is actually happening in the US Right, whether you take lending Payments, whether you take P2P, right companies like Venmo the company is like brain Lender all of them are mushrooming mushrooming pretty fast and banks like Bank of America and others are actually Ahead of the curve in terms of trying to actually create APIs for custom solutions and working with startups Fintech companies to actually realize value for the end consumer, but it is fragmented It is not UPI where the ecosystem has come together to say that you know what? Let's have a standard and let innovation happen from there. So with that primer What are the big benefits of UPI? So I said that UPI is basically a Uber brokering layer that exposes an API across the banks. So what does it really do? So these are some of the things that most folks are aware of at least from the perspective of the Joggen in terms of okay, this is what UPI offers single click to FA Right single click to FA is basically that all the transactions are still second factor authenticated and authorized But when you're actually transacting it is single click It's basically a pin entry because you have pre authorized the first factor of authentication Right, and there's a very very important design pattern that has actually allowed that push and pull model of transactions We were discussing just before this about UPI being here to stay Unlike IMPS like IMPS was an attempt by NPCI to actually take simpler direct debit payments To the consumer and to merchants But of the many things that really didn't help IMPS take off IMPS is still one of the fastest growing for remittances But one of the many things that didn't allow it to take off for businesses is the fact that it was a pure push There wasn't a pull model where merchants or businesses were able to actually raise charges And the customer then paying that through IMPS easily. There were some attempts with OTP based solutions, etc. But they were fairly clunky Really unless you actually have a solution that is better than the existing solutions. Nothing is going to take off This is where UPI scores, right? It is a model that allows you to actually do direct or push payments as well as raise collect or what is called as pull payments Four-party transaction model now the four-party transaction model is extremely exciting. It's one of the reasons that People like us phone pay and a lot of others are actually playing in this space And are hoping to actually create value for merchants as well as consumers by being part of this whole payments ecosystem What it really means is that in any transaction There are two acquiring sites and two issuer sites, right? So there's a merchant who's working with the bank there is a payment provider who's acquired that merchant and is powering payments on that merchant and There's the consumer who has a bank account And there is a payments provided to the consumer who is actually Giving access to his bank account now the Transaction is really happening across these four parties Which basically means that the acquirer or the payment provider on the merchant is able to raise a charge or invoice to the payment provider for the consumer and They are able to authorize the transaction so that the bank on the merchant side is able to receive the funds From the bank on the consumer side. Why is this different? Traditionally the way it has happened is This responsibility has not been split the way UP has allowed it to be between the acquiring side and the issuing side and With this it is a lot of possibilities in terms of the kind of innovations that can VPS I think a lot of people are familiar with VPS and address ability I'll touch upon some of the things that can happen with that in the next slide Federated identity management. Now. This is a very very critical part of UPI which basically has in a way allowed you to identify yourself to the network While not necessarily being connected or authenticated or authorized by your bank, right and that is very very powerful it is There are models across the world which actually are allowing you to Do this which is basically separation of authentication authorization But most of the models that actually have worked have actually unlocked tremendous value, right? And finally the overall scalable architecture. This is one part that I Think Shrikanth would be touching upon if I understand correctly about how UPI is structured What is really the platform what it offers and how it can be leveraged? so Coming to the main slide this is this is actually all I wanted to talk about today The rest of it was more about a simple primer into why UPI is so great And it's mostly about discussions that are already there in the media and the marketing around UPI itself But some of the points that most folks miss out is what is UPI really really solving and how it can be leveraged by a whole bunch of us To create value to create new companies to actually bring about solutions that we couldn't dream about before One of the biggest things is access to money access to money has To your own money has never been that easy, right? It depends on multiple things it depends upon the kind of bank account you have which is the bank account provider How ahead of the curve the banking system you're working with is on technology, right? Is is your bank well integrated with the merchants that you are Using whether it's online or offline All of those factors come into play for you to be able to access your own money from your bank account What UPI has done is very very effectively democratize that access It's basically said that it doesn't matter Where you have your money or in which bank account, right? The fact that there are players who can build solutions Over the UPI layer for you to give access to your money and the fact that banks are Allowing that right is a huge step forward Right. So if you look at it the keeper of funds The banks in this case are the perfect keeper of the funds. That's where the money should be That's a philosophy that we've always run with that your money is safest with your bank, right? But the gatekeeper of accessing those funds need not necessarily be the bank as long as the bank is I play a role when you access How you access if it can be separated out, that's a huge step forward now in respect of how UPI fares This thinking wherein we are allowing players to come into the ecosystem to allow seamless access to funds in a bank And banks are enabling that is something that we should all celebrate significantly because that's where a lot of innovation can happen All the talk about lending Credit P2P credit right moving funds easily for buying goods or buying services Whether they are micro payments for a few rupees or whether a large in terms of mutual fund investments All of them become much simpler because of the fact that this access has been democratized separation of authentication authorization, so this is the one that I was talking about in the previous slide that This is really with UPI the true social OAuth movement for payments. If you look at it. There isn't really a OAuth right we have social logins for Websites e-commerce plays we have all these things wherein you are able to identify yourself Through what you believe is one of the best channels to identify yourself authenticate yourself The transaction itself can be authorized by the issuer right as Yad Vindra was saying the issuer always has to authorize the Transaction, but authenticating yourself through a mode that you believe is the best is something that UPI is ushering in right the fact that We have Adar enabled payment systems where you're able to say that you know my fingerprint authenticated by the other system Can be my authentication and that authentication can persist for a set of transactions which can be authorized on a recurring basis or one-offs is Important step UPI itself has been designed as a platform to be multimodal when it comes to authentication When you have such a brokering layer that is across the banks across the authorizers of action and you've separated out the You can actually become plug-and-play for authentication. So I could imagine a whole bunch of startups that can innovate in this space to say that this is the new way that we are authenticating ourselves in fact as most of you would know passwords are passé the discussion is all about how passwords are the most useless Recently I was at money 2020 in the US and The only largely two discussions that were broadly dominating it the first one the biggest one was basically authentication and fraud and The second one was largely about open APIs and disruption through fintech Now the authentication part there is there are startups that are working on things like your digital footprint being the best fingerprint that can be there to authenticate yourself Which means that this is everything from your Facebook post which are actually public This is about conversations that you possibly have over some medium. It is about your Transaction profile across a bunch of websites creating fingerprints out of these and allowing you to authenticate through that fingerprint There's research showing that that is one of the best ways most difficult to break and secure Right. I'm not saying that is the way the authentication will work But the point that I'm thinking about is the separation of authorization and authentication opens up the window for that Where tomorrow we don't have to be Forced to say that you know what OTP coming from the issuer to my phone is the way I authenticate myself If you realize that's a authentication authorization that is combined together The OTP coming to your authentication and you putting that OTP back is an authorization and you're forced to use that Right or a password That is to be entered on a third-party page that is mandated because of the Interchange or the payment provider, etc. That also can get disrupted So this point is very very important and it opens up a window for much better consumer experience and possibly much higher security also when it comes to Authentication and I'm hoping there are a bunch of folks that are actually Taking this point. I know a few companies that have approached us and have some novel solutions Personalization of the financial identity This is basically about the VPA and the fact is that once you separate out the identity from your financial Instrument and you're able to use that identity to address that financial instrument, which is what a VPA does It brings about a whole new set of possibilities You can move across that identity. You can actually loan that identity to somebody else You can create personas out of that, right? I could say that I'll create an identity that is for my kids spend online and I could actually create a profile against that not just Monitor it like big brother, but also control the spend So the idea of creating your personalized identity that separates it out from the financial instrument isn't Very very inspiring Concept that can be milked from very beautiful solutions and can again create a whole new ecosystem of Companies and solutions for the consumer Right and find a third-party service provider for payments I think this is ushering in a new era of partnership between companies and banks I say that fully aware of the fact that we are going through a certain amount of pain with ICICI and phone pay But I still believe very very strongly that this is going to be the biggest game-changer These are teething pains our partnerships will evolve But the fact is that once banks and traditional financial institutions Start thinking about the value that the ecosystem on the tech front can create through these partnerships And you pay is a forcing function for that It will actually create a whole new set of boutique offerings that not just bring efficiency But also actually start forcing us to think about how we can actually offer financial services in a much better way using technology that's Largely what I had I think I've covered most of this. I heard the bell We just have time for questions. I guess Yeah Thank You Rahul. We'll take we have about four minutes for questions So let's start with yeah two questions there and one question at the back Please just make sure you introduce yourself before you ask. Hi, I'm Rakshaak So you mentioned that for four party thing right where four people can Four providers can actually interact. So is there any way like any anybody can create an app where we can interface with UPI and Have our own Transaction mechanism, but just that we can interact with UPI but not actually use any of the third-party apps that the banks provide Like beam or phone pay like can we create our own apps and then directly interact with UPI using this four-party thing? Yes and no Not because you should use phone pay. That's not the plug here. You could use phone pay the answer is Yes, because you have you can tie up with a bank and use the banks To UPI itself and build your solutions on top of that purely as an acquirer Not not as the sure at all, which is what you want to do Know that you cannot directly talk to the year by bank So so you can partner with the bank. This has always been the case from Day one. There was a hackathon on UPI. You have to actually approach a bank The bank has to actually have the confidence that they will be able to give To the UPI pipe through their technology and then you'll be able to access the UPI layer without necessarily partnering with the third-party app Like phone pay. So what's the difference between acquirer and hang on? We move on to other questions. Could you just yeah? Yeah, Mukesh. So the cap on UPI transaction is point seven percent, right? That I know so what is the divide between the acquirer and the issuer and how does a PSP on one side make more money than the PSP on the other side? Does the PSP on one side? the rules are very similar it is It is a division between the Acquirer and the issuer. Yes, there is clear differentiation of who the acquirers who the issuer is who gets how much It is very it is exactly like debit cards when it comes to the cap or the cost structure debit cards are regulated by RBI in terms of what is the? MDR rate or the merchant discount rate that you can offer UPI is exactly that and there is a split that is Specific to acquire an issuer. Yes We had a question right at the back there. Yeah. Hi this satyajit here from zero the first of all great talk Secondly, we are regulated by the SEBI. So we expect if the money is coming to our account We need to know the account number of the person But why what UPI does is it keeps on adding more less which is great for the end user But we so XYZ at the rate access bank. Yes bank any bank is not a good enough ID for regulations to Accept it as an authentication. So is there is there something happening on that end because as well as your talk is concerned I saw a lot of layers being built on top of ID handles given to them, but the handles are never not enough for the regulators. So Fair question. I think my talk was specifically about the excitement layers or the kind of layers you can build can bring about in the ecosystem The handles are basically an address ability. Ultimately those handles will resolve to a bank account or a banking reference number That any regulator like SEBI would accept right now if you're working with a bank and the bank is your acquirer bank that bank does have the capability for audit purposes right or for reversals etc to have a translation layer that would allow the VPA as we call it or the payment identity could to get translated to a bank account. So Assuming that you're working with a bank to provide UPI services the capability to get audited through the bank to ensure that these are legal account numbers It's very possible. It's after all a mapping. Yeah, my name is Sudheep This question is about competition to UPI like for example I think NPCI has come up with an interface with a lot of banks have followed Would it be possible that let's say foreign banks come in and some of the Indian banks get together and say hey Let's start a new Interface and let's bring it more global Then what will happen to UPI and should we look at what future be holds when UPI has competition? Right now I'm grappling with competition within UPI you're talking about new UPI right It is possible It is not very probable right and the reason for that is simple It takes a lot to bring together the banking system to build something like UPI and it takes a lot in terms of everything from the regulators the government right Technology providers a lot of stars need to get aligned I think the amount of effort that has gone into build UPI it would take a lot of either friction Possibly NPCI or anybody else is creating a lot by the way or it is about UPI Just not taking off for anybody be it a group of Indian banks versus foreign banks to choose not to collaborate Versus actually compete and build a new layer We have one last question Is there any difference in the role played by a payment gateway service provider and UPI? Is there a different role played by a payment gateway service provider and UPI? well, I think as Adwendra explained I think Even with UPI you need to have some sort of a payment service provider who gives you access to UPI I don't think it is eliminating the role of a payment service provider, right? What it can do is reduce the number of intermediaries or hops and the number of parties that are involved in a transaction between a merchant and a consumer, right now Effectively what it does is reduce the number of intermediaries possibly therefore create more vested parties Where the spread is larger there you have less parties involved the number of the bips itself as you're saying can get shared in a nicer manner or a more Incentivized manner possibly right, but the payment service provider that role continues to stay that role does not go away I'm sorry. We're out of time for this particular talk all of the speakers will be around so you give free free to ask some questions