As banks have started to limit the number of free transactions to consumers, coupled with waive off of charges on merchant payments (NEFT, RTGS), the market will create an immense opportunity for revenue generation to the ecosystem players. Indian merchant digital payments ecosystem is yet to be tapped, while the consumer payments wing is looking lucrative for start-ups, Fintechs, tech firms, and lenders. Since, UPI 2 has already been put up in place, Indian digital payments ecosystem will see heavy number of cross-border financial services, insurance & fintechs entering the market place.

1. Challenges of UPI platform in India
The introduction of UPI has revolutionized the way transactionsare done, paving way for a cashless
economyinIndia.Ithasbeenwelcomedbyalotof merchants,rangingfromestablisheddepartmental
storestostreetfoodvendorssuchthatitthere wasa time whenitwasperceivedthatthere wouldbe
no possibilitiesforthe lattertakingupsuch venturesinacceptingpayments.Now we cansee a lot of
merchantsjumpingintothe bandwagonalong withbankscollaboratingwithpaymentportalsto join
the UPI race. Factors suchas the increase inthe usage of smart phonesalongwiththe govtinitiatives
fuelledthe same.However,itwastakenupwithseriousnessafterdemonetization,during2018 which
made a lot of people and merchants use digital payments extensively. Also, UPI offers immense
opportunities to the fintech, Banks and ecosystem players.
While there hasbeenamassive700%rise inUPI’svalueof transaction,whichiscurrentlyat800million
transactionsonMarch2019; there hasalsobeena2% fall inthe totalvolumeof payments,seenduring
early2019, whichwasat3.6%, a yearago.Despite havingitstransaction successscore of 85% in 2019,
the declined
People perceiveUPIpaymentstobe arevolutionintechnology, despitehavingitsowndisadvantages.
Thisis because afterdemonetization alotof leadingIndianbankscouldnotcope up with the pace of
digital adopting,whichiscurrentlyslowingdownUPIpayments.Majorly,on-goingchallengesare with
the bank servermanagement andconnectivity. There hasbeeninstance where moneygetsdeducted
but takestime toreflecton useraccounts,causingdelays.Also,therehasalsobeenamomentwhere
the UPI portal will malfunction when it tries connecting itself with bank servers, which is also a
significant reason for users to moving away from such UPI Apps.
It is estimated that the over 15 millionUPI transactions were failed in March-April 2019; and the
average value of transactionwasat$25 duringthe same period.A significantshare of ithasfaileddue
to server-side challenges.
This can be addressed in three ways:
 Cloudmigrationwouldalsobe a cost-effective initiative asBanksnow can cut-downon their
on-going operational expenditure.
 Bringing Datacentre close to the user groups could be possible solution to address this on-
going challenge.
 Also, adding a layer of analytics within Bank’s UPI to understand the on-going transaction
trends in real-time to understand customer demographics would address the on-going
disadvantages with server management
Speaking about UPI for Fintech enterprises, there is a serious debate between the ownership of
customers.Expertsclarifythatforbill paymentsandrecharges,paymentplatformshave arelationship
with customers, but the settlement part is claimed by the banks, thus it’s a mix of both as there are
multiple service providers to make a successful transaction. For example, Yes Bank got into a
partnershipwithPhonPe;similarly, SBI,HDFCbankandICICIbankhave partneredwithGoogle Pay.By
doing so banks are able to restrict payments instead of allowing payments to go into an insulated
wallet ecosystem.
UPIhasalreadysurpassedmanydigitalpaymenttechnologyproviders,intermsof transactionsuccess.
However,there are certainon-goingchallengesaffectingthe ecosystem, majorlydue to the strategic
disadvantage of Bankstosupportdigitalpayments.However,UPI2.0,launchedin2019,whichislikely

2. to addresssome of the connectivityside problemsaswell asit will openuphuge opportunity forthe
banks, Fintech, ecosystem players and technology companies to collaborate for a digital future.