UPI has transformed payment methods in India. It’s very trusted and extremely easy to use. Next, think of it as walking to an ATM. NPCI is seeking permission from the RBI to allow this. They wish to do it using QR codes for cash withdrawals. There would be over two million locations for this.
Banking correspondents, such as small local vendors, will facilitate this. Cash will be dispensed to you immediately by scanning a QR code. It sounds revolutionary, doesn’t it?
You will need some cash. You walk into a nearby BC outlet (banking correspondent). BC will show you a QR code. You will take your UPI app, like PhonePe, and use that to scan the QR code and enter the amount you would like to draw cash. Enter your PIN to authorize the transaction. The cash will be dispensed to you in a matter of seconds. There is no delay with your UPI account being debited.
The shop will be instantly credited on the availability of cash. You can imagine this process being safe and as easy as paying for a chai right now where cash limits of UPI are low, you can only draw about ₹1,000 to ₹2,000 at a time but if the RBI grants those permissions we can imagine amounts of around ₹10,000. It will be vastly different than small amounts for many people.
Banking correspondents are innovatively growing their business in small towns. They bring banks to communities with no bank. Many of these banking correspondents already facilitate Aadhaar authentication and micro-ATMs; adding UPI only makes cash accessible to most households.
People living in rural areas will no longer have to go to great lengths. Fingerprints worn out? No problem because of the scan of the QR codes. Card skimming? No worries because of UPI. All it takes is the app on your phone. This could bring millions of people into the fold of easy banking.
Not everything is plain sailing. Experts are concerned that fraudsters will join in. The easy QR experience may trip up some people who use it. A few of the BC locations are a front for laundering, masking the money stolen from others. They arrange a money transfer through multiple accounts for expediency.
If the system doesn’t have enough safeguards cloudy on individuals in the shop’s, criminals attempt to steal funds from shops can increase while they rebuild their trading histories.
In short, there are all sorts of risks, so NPCI needs to secure their platform first. It would be necessary to implement standard fraud checks on everybody using the app to minimize skimming, However, we might hope RBI reluctantly considers their workers while they are innovating another platform joining UPI into daily life banking.
Like cash everywhere and anywhere in India — if the app gets approved quickly — what are your thoughts on UPI’s popularity? —game-changer or too risky?
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