Every app a UPI app and credit is the next big thing: Anuj Kacker

The introduction of credit on UPI rails seems to be the next step, promoting economic growth. Image: Shutterstock
 
Anuj Kacker, co-founder of neobank Freo, spoke to Forbes India about how fintech is evolving in the country. The potential for UPI to grow is far from getting exhausted, and credit via UPI is the next big wave to watch, he said. Edited excerpts.
 
Q. What’s the big picture with respect to how fintech is playing out in India?
In our pursuit of a $5 trillion economy, the key lies in boosting GDP per capita, largely driven by middle-class consumption. While the affluent spend more per person, the masses must also partake, necessitating robust financial movement.
 

This is where the entirety of the banking sector, alongside government initiatives like infrastructure development, comes into play. Amid these dynamics, fintech is set to shine over the coming decade. As founders and a team, we stand poised at a crucial juncture, at Freo, contributing our part to this journey.
 
The broader context emphasises the significance of money's role in our nation's growth, making fintech a pivotal force. Our actions align with this narrative, working towards facilitating financial engagement and enhancing economic prospects for everyone.
 
Q. What do you make of this new feature being introduced via an SDK (software development kit) so people can pay within an app using UPI?
Regarding the new SDK under discussion, my interpretation leads me to believe that its origins trace back to a vision of transforming every app into a UPI-enabled platform. While I lack intricate details, my assumption is that someone envisioned a scenario where every app seamlessly integrates UPI functionality.
 
However, practicality posed challenges, including security, monetary transactions, bank involvement, and authentication, making instant implementation impossible. Nonetheless, this vision set the foundation.
 
Now, a new plugin or SDK has emerged, offering a solution. The noteworthy aspect is that users won't need to switch apps to make payments, addressing a common inconvenience.
 
From personal experiences with apps—like food ordering apps, for example—I’ve often faced disruptions when switching between apps during transactions. Network issues, incoming calls, or app failures have led to aborted transactions or even order cancellations.
 
This can lead to failures and lower conversion rates for the app. The novel plugin seeks to remedy this. By embedding the UPI payment experience within the native environment of the app, the transition appears seamless, although the backend may still interact with another payment app. This integration is anticipated to enhance conversion rates and decrease dropouts.
 
Given that a significant portion of online P2M transactions (around 60-70 percent) rely on the UPI network, it makes sense to bolster this payment method's success. The idea is to enable every app, including grocery delivery and more, to accept payments without intricate tie-ups or plugins. While regulations governing various industries' payment acceptance differ, this new SDK streamlines the process.
 
Overall, this SDK marks a significant step towards the envisioned future where every app is essentially a UPI-enabled app. By eliminating the need for users to switch apps for payments, this innovation aims to create a more seamless and satisfying customer experience. This, in turn, could contribute to achieving the overarching goal of making UPI payments a ubiquitous feature across a wide range of applications.

Also read: Payments banks: Why they'll be tested as they aim to become bigger & stronger
 
Q. What does this development mean for the large payments app providers?
I'm uncertain about the extent of the impact. Companies like PhonePe and Google Pay are adept at developing plugins and SDKs. They're already involved in the payment gateway sector and are likely to integrate these tools directly or through third-party players.
 
This move could lead to a competitive rush, making it easier for apps to embed UPI payment functionality swiftly. The possibility of these players charging merchants for using their code might emerge.
 
Although effort will be required to create and market these SDKs/plugins, the presence of established UPI players with significant market shares means they can efficiently onboard merchants. This may not create a massive disruption.
 
Much like the equilibrium achieved after mobile number portability (MNP) was introduced in the telecom industry back in 2012-13. While some initial shifting might occur, the overall landscape could eventually stabilise. Unless certain players opt to remain uninvolved, the industry should navigate this transition without significant turmoil.
 
Q. Can you give us a sense of what you think is the government's reason for doing this? Overall, is it another step in expanding access to UPI?
My response here is a bit speculative, but the broad-reaching vision might be about turning every app into a UPI platform to ensure widespread access. While UPI is widespread, the goal could be to expand its reach even further.
 
The introduction of credit on UPI rails seems to be the next step, promoting economic growth. The government and NPCI play vital roles in this endeavour, balancing expansion with security. The central idea could be to progressively broaden accessibility while safeguarding data integrity, making these actions a part of a strategic plan to achieve this vision.
 
I don’t know when it will be widely available, but we’re exploring its potential too. I assume it's already in trials with major merchants, especially those driving substantial online activity. Changes are evident in the apps I use; previously, one had to switch between payment and original apps, but now it's integrated. This seamless transition hints at ongoing changes.
 
Q. And what do you think is the big picture with respect to what more we could do with UPI?
UPI has widespread use, but its potential is far from exhausted. Expanding its adoption aligns with economic growth and the shift towards digital transactions. Despite UPI's high usage, cash circulation remains substantial. Encouragingly, there's room for further digital expansion, reducing costs and enhancing government efficiency.
 
Introducing diverse use cases like UPI Lite, collections, and auto-pay could make UPI truly ubiquitous, gradually reducing cash dependence. The prospect of international implementation could also facilitate commerce, fostering better trade relations and forex revenue.
 
The upcoming focus on credit via UPI appears transformative. By extending UPI's rails to credit transactions, perhaps with variations like cross-border accessibility, the economy could experience a significant boost. Enabling last-mile credit delivery even for smaller amounts might open doors for economic growth.
 
I'm quite optimistic about credit on UPI being a substantial catalyst, potentially reshaping the macroeconomic landscape. Keep an eye out for developments in the coming months, as this shift holds promise.