Context:
The National Payments Corporation of India (NPCI) is considering a feature known as UPI Meta, which would allow users to save their preferred UPI ID on popular merchant websites. This would streamline the checkout process, enabling customers to bypass the step of selecting their UPI ID every time they make a payment.
Key Details
- Current UPI Flow: Presently, customers have to manually select the UPI app and account during the checkout process.
- UPI Meta: This new feature would let users save their UPI ID on merchant websites (e.g., e-commerce platforms, travel apps), reducing friction in the payment process.
- RBI Approval: NPCI will need clearance from the Reserve Bank of India (RBI) before launching this feature.
Benefits of UPI Meta
- Convenience: Users won’t need to input their UPI ID or select a UPI app every time they make a payment, improving the customer experience and transaction success rates.
- Parity with Card Payments: UPI Meta would align with card tokenization, a feature already available for credit/debit cards, which allows for secure and faster payments without re-entering card details.
Concerns Around Concentration Risk
- Impact on Smaller UPI Apps: Some industry insiders have raised concerns that UPI Meta could disproportionately benefit large payment apps like PhonePe and Google Pay, which dominate UPI transactions (over 80% of UPI payments are processed by these two platforms).
- Smaller apps may struggle to gain market share, as these large apps could secure customer consent first, making it harder for newcomers to establish a foothold.
- Incentive-driven Acquisition: Smaller UPI apps like Cred, Navi, and Super.Money are already using offers, incentives, and cashback to attract customers, but the new system might limit their ability to compete effectively.
Measures to Address Concerns
- Explicit Consent for New Gateways: To mitigate concentration risk, if a large merchant obtains user consent via one payment gateway, any transaction through a different gateway will require explicit user consent again.
- Focus on Diversification: NPCI has been encouraging smaller UPI apps to enhance their customer acquisition strategies to reduce the dominance of PhonePe and Google Pay in UPI payments.
What is Merchant Website?
A merchant is a seller in other words. A merchant’s website is an online shop or a website where a sole proprietor or a company accepts payments for their products or services.
If you want to accept payments on your website, you need to open a merchant account with a payment institution. What is a merchant account? It is a special bank account used to receive funds transferred by your customers. It is offered together with a payment gateway and many other features.
