This fresh interface is set to change payment game
Apr 24 2016
This will also require the individual to take a relook at the various methods that they have been using for the purpose of making their payments. Here is a detailed look at the issue and the places where one will be able to use this system.
The unified payment interface allows for the direct transfer of money between bank accounts. This is also in real time which would ensure that the individual is able to know exactly where the money is going and coming. This makes it a convenient aspect for the purpose of ensuring that the system is used for making payments. It calls for the creation of a virtual identity and this would be used for the purpose of making the money transfers.
It can in effect be handled through the mobile phone so all that is required is a phone which most people now have. The way this process works is that the individual would link their bank accounts to this virtual identity. When someone wants payment then they would ask for the specific amount from this virtual identity. The individual would on his part has to authenticate the transation and then the amount would be transferred. This also shows that the system has the necessary amount of security so that the user is protected from frauds.
One of the areas where the system will have a very useful impact is that of the vast number of small payments that one makes. In effect this system would be a replacement for the cash that one uses in day -to-day activities. Take for example a situation where one goes to a local shop for the purpose of making some purchases. At present, most of the small shops do not have point of purchase terminal and hence, the individual is forced to used cash for the transaction.
Once this new system is working the person who has to receive the payment would just ask for the amount through the interface and this would be immediately confirmed and paid. This would eliminate a lot of the problems related to handling of cash and getting change that occurs in the normal activities of the individual.
There are two main reasons why the system can have a wide usage. The first is that it requires a bank account to be linked to the virtual identity so that the payment can be made. This is different from a system where a debit or credit card is used where not everyone has access to the facility. On the other hand most of the people have a bank account and hence linking this is very simple and it can be easily done so everyone can be a part of the system.
The other thing is that the entire transaction can be completed using a mobile phone which will be the route for handling of the details. This is again present with everyone today and hence it would encompass virtually anyone who goes to the store for the purpose of making a purchase. This would enable the entire system to go cashless which is a very positive thing and it makes the handling of the payment aspect easy for the individual concerned.
(The writer is a chartered accountant & a financial planner)