On November 9, the day after Prime Minister Narendra Modi addressed the nation and announced that Rs 500 and Rs 1,000 notes would no longer be legal tender from midnight, his stately visage appeared on the front pages of newspapers in an advertisement for Paytm, India’s largest mobile payment platform. The ad congratulated Modi for “taking the boldest decision in the financial history of independent India” and urged readers to “join the revolution” by using Paytm. 

The Emblems And Names (Prevention Of Improper Use) Act, 1950 restricts the use of “the name or pictorial representation of Mahatma Gandhi, Pandit Jawaharlal Nehru, Chhatrapati Shivaji Maharaj or the Prime Minister of India” for the “purpose of any trade, business, calling or profession”, unless given “previous permission of the Central Government or of such officer of Government as may be authorised in this behalf by the Central Government”. So, while the PM himself hasn’t come out overtly in Paytm’s favour, one has to assume that his office gave Paytm the go-ahead to use his image to advertise their product.   

Paytm and other mobile wallet companies have certainly reaped the benefits of demonetisation, given that nearly 85 per cent of currency circulating in the Indian economy could not be used for transactions from November 9. Hospitals, petrol pumps and a few other locations would accept old currency for 72 hours, the PM had announced on November 8; the rules around the exceptions have since been repeatedly altered. Paytm registered a 700 per cent increase in overall traffic and 1,000 per cent growth in the amount of money added to the Paytm accounts, while rival MobiKwik has seen transactions grow 18-fold, as of November 14. Paytm’s Gross Merchandise Value (GMV), which estimates the total worth of goods sold through a digital platform, touched $5 billion four months ahead of target, following demonetisation. An ANI story about a tea stall owner in Delhi who began accepting payment from customers using Paytm hints at its surging popularity, if not by choice then due to the compulsion of not having cash.

But while the country is discovering its love for Paytm, the same cannot be said about the Reserve Bank of India (RBI) backed Unified Payment Interface (UPI) peer-to-peer payment system.

UPI, launched in August this year, allows instant transfer of funds directly from one bank account to another (the two bank accounts need not belong to the same bank) through a smartphone app. Explaining the difference between UPI and mobile wallets, Ajay Shah, an economist at the National Institute of Public Finance and Policy, told Newslaundry that the latter are essentially “cut off from the main financial system”. “You can take money from your bank and put it in a MobiKwik wallet, but you can’t take money from a MobiKwik wallet and put it to a bank account,” he said. The RBI, through the National Electronic Funds Transfer (NEFT), the Immediate Payment Service (IMPS) and now the UPI, has facilitated “bank-to-bank” transfers, while barring wallets from doing the same, Shah added. 

Bank-to-bank fund transfers bestow a significant advantage on UPI over mobile wallets as it eliminates the intermediary step of moving funds from the bank account to the wallet, and then forwarding the money to the recipient. Moreover, UPI doesn’t require the payer and payee to share sensitive information (bank account number, debit/credit card number, IFSC code etc.) with each other; all that is required to execute a transaction is a ‘virtual ID’ (or mobile or Aadhaar number) which one creates after downloading the UPI app and a preset Mobile PIN (MPIN). Also, unlike mobile wallets, where users can only carry out ‘push’ transactions (that is, send money to a person/vendor), UPI users can initiate ‘pull’ transactions as well, which allows a person/vendor to request payment from others. Multiple bank accounts can also be linked to UPI, adding to the list of advantages that it offers. 

Its one disadvantage, compared to mobile wallets, is that not all banks are offering UPI services yet. Out of nearly 90 scheduled banks in the country, at the time of UPI’s launch, only 21 banks were on board. According to the National Payments Corporation of India (NPCI), since the launch that number has swelled to 27. There have been hints that the country’s largest bank — the State Bank of India (SBI) — may have started offering UPI services to its customers.

There has, however, been no official statement from the bank regarding this. When contacted, the bank’s customer care executives could not confirm whether UPI services could be availed by SBI customers. However, Manju Agarwal, Deputy Managing Director (Digital Banking and New Business), SBI, did confirm to Newslaundry that the SBI UPI app has been launched on November 23.

Despite the obvious benefits that UPI has to offer – especially in the wake of demonetisation – the government seems to have made very little effort to educate the public about it. It could have also taken steps to ensure that more banks begin offering UPI services so its user base could be expanded. Newslaundry sent questionnaires to the RBI, Joint Secretary, Department of Economic Affairs and Minister of State for Finance Arjun Ram Meghwal, inquiring about what measures the government is taking to popularise and encourage the use of UPI. We have yet to hear back from any of the bodies above and will update the story if we do.

However, in the absence of an official response, it remains unclear why the government is underselling a service which can contribute significantly to its goal of a ‘cashless economy’.