UPI 123PAY: How the good old feature phone will boost digital payments among micro businesses

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Credit and finance for MSMEs: According to the RBI, there are over 40 million mobile phone users in the country. The UPI 123Pay multilingual service allows users to pay digitally without an internet connection.

Credit and financing for MSMEs: Jodhpur-based Ghanshyam Ojha, who has run steel utensil manufacturing and supply business Shri Ram Metals since 2012, relies partly on cash or checks to receive payments from some of his customers who continue to be comfortable with feature phones. Despite other digital payment options such as online banking, its retail store customers “prefer cash or check payments. They also know about UPI, but they want to stick to feature phones. Also, they don’t want to keep a smartphone as a second device to pay digitally,” Ojha told Financial Express Online. UPI allows users to make or receive payments through their smartphone using a QR code or phone number.

Currently, Ojha has around 600 retail customers across Rajasthan and most of them are comfortable with UPI payments, thanks to the increased adoption of smartphones in the country. For those still clinging to feature phones, Ojha hopes that the recently launched UPI payment instrument 123PAY by the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) will do the trick and also help him. save time in payment settlement.

“There is a risk in handling cash and the waiting time involved in settling check payments can be up to 48 hours. We will try to explain this new solution to our customers who rely on feature phones “said Ojha, who also plans to reward customers who pay through the new feature throughout the year. “The reward can be, say, a discount on goods sold to them,” he said. he adds.

The decision to introduce a new payment option for users of feature phones has been taken by the RBI to bring UPI payments to those who continue to use these devices due to their ease of use or price. affordable. According to the RBI, there are over 40 crore mobile phone users in the country. The UPI 123PAY multilingual service allows users to integrate their feature phones with bank accounts to pay digitally without an internet connection except through the scan and pay method.

Experts claimed that the move would significantly improve the adoption of digital payments by small merchants, micro businesses and sole proprietorships. “It was the handy fruit to broaden the base of the digital economy. Many people and small businesses in small towns and a few in urban areas are also using feature phones. UPI transactions are expected to hit 100 trillion rupees this year and we hope we can double the pace to reach 200 trillion rupees next year with the new solution which is expected to bring more merchants into the digital fold,” Vishwas Patel, Chairman of the Payments Council of L India told Financial Express Online.

The scalability of the new solution apparently hinges on its ease of use. According to NPCI, UPI 123PAY is a three-step call, choose, and pay process. Using the IVR service, users need to call 080 4516 3666, select their preferred language, press the “1” key on the phone to transfer money, confirm the bank name by voice command, press the key “1” to transfer the amount, enter the recipient’s mobile phone number and the amount followed by the UPI PIN code to authorize the transfer. The UPI PIN can be configured during the call through the debit card details before transferring the amount.

“The idea is to provide more payment options to consumers who largely use feature phones, and then allow the market to experiment and innovate more to improve digital payments. use and security in using a solution that is relevant to the end consumer and if you also build trust in it, the solution speaks for itself and evolves with a network effect,” Arif Khan, Chief Digital Officer, NPCI says Financial Express Online.

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It is important to note that UPI 123PAY is not the first initiative of its kind by the RBI to bring feature phone users onto the UPI bandwagon. NPCI had brought UPI to feature phones in 2016 via the *99# dial option through USSD-based services. USSD was unstructured supplementary service data that allowed users to enjoy mobile banking services such as fund transfers, checking account balances, generating bank statements, etc., without a smartphone or an internet connection.

However, the USSD-based service has proven cumbersome and not all mobile operators allow such services, RBI Deputy Governor T Rabi Shankar had said while launching the UPI 123PAY service. . “The *99# service has faced challenges from telcos. It’s not an interoperable solution. If I have to send someone money and we’re both on two different networks, both telecom operators will need to activate the service for the transaction to complete.The charges are also very high.You are charged Rs 50 in advance after dialing *99# whether you use the service or not Therefore, over time its usage has remained very low and no one has actively promoted it,” Vivek Singh, co-founder of sound payment service provider ToneTag, told Financial Express Online.

ToneTag had launched the voice-based UPI payment solution for feature phones last week after the RBI announced the UPI 123PAY solution. In association with NSDL Payments Bank, ToneTag has launched its IVR 6366 200 200 for fund transfer, utility bill payment, balance inquiry, DTH recharge, prepaid mobile connections, FASTag, etc. The technology uses sound waves to enable contactless communication between devices or in other words use high frequency ultrasonic waves to transfer data between devices.

The payment use case with feature phones has further highlighted the importance of these low-cost, no-frills devices. While their adoption has certainly dropped with the smartphone revolution in recent years, their long battery life, which even lasts more than two to three days depending on usage, has remained a key factor in their existence.

“People think feature phones are going to disappear, but they’re not. Their long battery life is the reason they are still used. If you’re a salesperson, feature phones are more convenient than smartphones,” Singh added. They are also less expensive and therefore economical for small businesses that buy them for their employees.

The new UPI 123PAY feature is also expected to boost not only digital person-to-merchant (P2M) transfers, such as paying for groceries at an offline store, but also peer-to-peer (P2P) transfers between two people. through payment apps like Paytm. , PhonePe, Google Pay, etc. Therefore, the business and personal use cases of transferring money through feature phones are significant. Still, experts said one of the biggest challenges in bringing small businesses into the digital payments fold is the tax net.

“From a merchant ecosystem perspective, taxation is one of the main issues deterring companies from accessing the digital highway. Unlike India, the governments of South Korea, Norway or Sweden give tax incentives to merchants to accept online payments. Today, let’s say a kirana owner does not want to be subject to tax or GST and therefore prefers cash transactions. Some tax incentives are required from the government to attract more micro businesses to accept digital payments,” Patel added. The current GST registration threshold limits are Rs 40 lakh in annual revenue for businesses supplying goods. The limit was increased by Rs 20 lakh in 2019.

UPI transactions in India have maintained an upward trajectory thanks to affordable internet and smartphone penetration. Trading volume jumped 97% in Feb 2022 to 452.7 crore from 229.2 crore in Feb 2021, with a 94% growth in value to Rs 8.26 lakh crore from Rs 4.25 lakh crore in during the said period, according to data from the NPCI. “During FY21, the total value of transactions made on UPI was approximately Rs 41 trillion. In FY22 so far, the total value of transactions is Rs 76 trillion rupees,” RBI Governor Shaktikanta Das had said during the launch of UPI 123 Pay. RBI had also launched a 24×7 hotline called DigiSaathi for feature phone users to resolve their queries regarding the use of the digital payment service.

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