Digital payments: Google wants the US Fed to replicate India’s UPI model.
The US Federal Reserve, or the Fed, should replicate India’s Unified Payments Interface (UPI). Model for its proposed interbank real-time gross settlement (RTGS) service, Google has recommended.
Launched in 2016, the UPI is the country’s flagship real-time payments system. Which allows users to transfer money directly from their bank accounts. Since it works across multiple bank accounts. Without revealing the details of one’s account to the other party. It makes paying someone as simple as handing over cash. It clocked 1.2 billion transactions in November, valued at Rs 1.89 trillion. Citing the UPI’s phenomenal success in India. Google, in a letter to the Fed, said FedNow should be an open system, like the UPI.
Statements from FedNow
“We’ve been pretty vocal that we believe the right model for driving digital payments is through a partnership between banks, governments and tech companies through open and standard-based infrastructures like UPI” tweeted Caesar Sengupta. General manager & vice-president, Payments and Next Billion Users at Google.
In August, the Fed announced that it would develop a “new interbank 24x7x365 RTGS. ith integrated clearing functionality to support faster payments in the United States”. The Fed Board asked for comments on FedNow by November. In reply to this, Google mentioned its experience of launching Google Pay. Google’s payments app which uses the UPI -in India.
It also says that the FedNow Service should enable “push” or “pull” transaction requests so that technology companies can build a platform. Where the user can initiate payments services with the bank executing transactions at the back-end, similar to UPI’s design.
UPI’s system allows banks, e-wallets and payment service providers to connect to the platform and build services on a mobile application. It also functions as a payments gateway for websites.
At the base of the system is UPI, on top of which customers can either use the NPCI’s BHIM app. Their banking applications or any of the numerous payments apps that have emerged in the last few years like Paytm, PhonePe or Google Pay.
Nearly 90 per cent of transactions on UPI are person-to-person transactions, where neither the bank nor the payments application earns a fee. Therefore, these players aim to build their revenues by cross-selling other services, particularly through merchant partnerships.
“Google partnered with regulators and the payments ecosystem to launch Google Pay. This helped drive and scale UPI usage through the Google Pay app, which currently has 67 million monthly active users,” Google said in a white paper.
By the end of the year, around 70 countries will have this uniform model of payment.
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