Interview with Mr. Gaurav Raina, Associate Professor, Indian Institute of Technology – Madras

Mr. Gaurav Raina

Associate Professor, Indian Institute of Technology – Madras

UPI #2 just released. Do you think new functionalities like OD account and one-time mandate will increase usage on the C2M loop? UPI has clocked impressive numbers in the P2P segments but the C2M numbers are estimated to be muted.

UPI 2.0 is certainly expected to help increase usage. It has recently been launched, so we will have to give it some time before we can see an increase in transactions. We do observe that the P2P segment continues to do well; however, the merchant numbers could certainly be better. To boost the payments ecosystem, perhaps the strategy should be to try and get 100m monthly users on UPI as quickly as we can. One will then witness significant network effects on the P2P side, and there will exist a sizeable number of users to boost uptake on the merchant side. There is a reasonable chance that we could reach 100m customers on UPI before 1st January 2020.


Speaking of mobile wallets, do wallets have any stand-alone use cases? Second, the RBI is going to release interoperability guidelines for mobile wallets soon. That will increase the optionality and utility of wallet-money. But what impact will this have on UPI, given that UPI’s appeal was partly based on seamless transfer of funds between different bank accounts?

Mobile wallet companies have done an excellent job of educating customers on m-payments. However, interoperability is key. One will have to wait and see what guidelines for interoperability are proposed by the RBI, before one can comment further on the impact on UPI. In general, the greater the interoperability in the payments ecosystem, the better it is for innovation, and eventually for consumers.


What is your view on the potential for USSD as a transmission channel for payments and payments+? The focus on UPI appears to have taken away from USSD, yet India will take some time to proliferate a data-dense ecosystem. Your comments.

In the early days, everyone thought that USSD was going to be the transmission channel that will take m-payments to large sections of society. In fact, the Mobile Payment Forum of India (MPFI), along with NPCI, had spent a lot of effort in developing a payment solution over USSD. From a user perspective, there could be many reasons why it did not gain popularity. First, it requires a certain level of literacy, which means comfort in reading all the menu options to entering all the information required for the transaction. Second, in terms of usability, users have to fill in all the details associated with any transaction every time. It might be an idea to promote USSD initially only for basic financial transactions like balance enquiries and mini-statements.


Let’s talk about feature phones; India still has a healthy appetite for feature phones – according to some estimates, feature phones grew @ 55% in the 4th Quarter of 2017. Are we developing payments applications and other contingencies for that ecosystem at a fast enough pace?

When one considers a feature phone, the transmission channels for financial transactions are SMS or USSD. To use either of these channels, the users needs a certain base level of literacy. We also need to consider the issuer of usability. All the details required for a financial transaction have to be entered by the user every time. This is cumbersome. Just because consumers are comfortable using a mobile phone for communication, it’s not clear that they would be comfortable using it to conduct financial transactions. One suggestion is that on a feature phone, at least initially, one should have only simple options for basic financial enquiries like a balance enquiry or a mini statement. This will get consumers used to the idea of using the mobile phone as a device to access financial information. To enhance usability, there should be standards for message formats that all banks should follow when their customers request for a balance enquiry, or a mini statement, via SMS or USSD. These standards can be used across all types of mobile phones.


Being an academic, how do you assess the payments ecosystem on the data-richness metric? The NPCI for instance only releases aggregate volume/value numbers that do not inform policy discourse. It is trite that disaggregated data would be more valuable across the Payments ecosystem. How do we get there?

On data, there are two issues. One aspect is the data related to the user, and the other is data about the payments ecosystem.

On data related to the user, the opportunity is to utilise this data to start offering customised solutions. Financial institutions will do well to harness the full potential of data science and artificial intelligence to usher in an era of customized financial solutions and services to Indian consumers.

There is the other issue of data that can help inform policy discourse. One way to proceed is the following: we first ask specific policy questions, and then work backwards on what data is required, and who one should get it from.


With proliferation of m-payments security and authentication becomes important. How close are we to taking “organic” authentication vectors like voice commercial scale? Is MPFI working with any startups on this front?

We constantly need to be innovating on both security and authentication.

For security, the judicious use of data science and machine learning can complement current solutions.

For authentication, we also need to cater for users who might find it difficult to use current modes of authentication to carry out a financial transaction. For example, people who are not literate, or those that are differently abled, or the elderly who may not be very comfortable with certain modes of technology. Examples of options are voice-based solutions, face-recognition, iris, and fingerprints. There are two aspects to these additional solutions: (i) the maturity of the underlying technologies for financial transactions, and (ii) the development of standards before they are used to conduct financial transactions.

As a first step, it would be great to see voice-based solutions being used to enter the transaction details, and then the user only needs to type in the MPIN (Mobile PIN).


What are your thoughts on the evolution of mobile-based payments and financial transactions in India over the next 1-2 years?

We need to constantly think of increasing the user base, innovating on authentication and security, and enhancing usability while being cognizant of privacy. In India, we have developed a range of solutions for mobile-based financial transactions and payments. Kudos to the entire ecosystem, but we need m-payment solutions to be adopted more widely. To that end, among all the available m-payment options, if some solution is gaining traction, we should push it to build a critical mass of users. For example, the P2P segment on UPI is gaining momentum. Once we have a critical mass of say 100m monthly active users on UPI, it will create tremendous network effects on the P2P segment, and possibly also impact uptake on with merchants.

For users with feature phones, we should promote simple standardized solutions for transactions requesting for bank balance or a mini-statement, via SMS or USSD. This will help in getting a large segment of users comfortable with using the mobile phone as an instrument to conduct financial transactions.


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