You frown at the number, but only for a fraction of a second, as you shrug and proceed. Your fingers tap four times, and a small rotating circle keeps you waiting a second longer, until a vibrant tick mark shows up. You thrust your phone into the shopkeeper’s gaze, simultaneously grabbing the little pile on the counter. Before he even has time to give a lazy nod, you are on your way, the wallet in your bag neglected and untouched.
Most people who swear by their mobile transactions were first herded towards mobile banking during the demonetisation drive of 2016. Printed notes were suddenly pricier than their worth, and it was heart-breaking to watch a shopkeeper shake his head at the Paytm screen being frantically waved in front of him.
Paytm is a digital wallet that had already been around for a while, but suddenly gained popularity during the cash crisis. Along with its contemporaries, including MobiKwik, PhonePe, etc., this application connects to the user’s bank account, and the user transfers money from the account to the wallet. Actual transactions, however, bypass the bank entirely, working solely within the system.
Being a semi-closed system, Paytm can receive from banks and interact with multiple merchants provided they use the same system. The merchants also have their separate wallets, and the money is directly transferred. The merchant is then permitted to transfer this money to the corresponding bank account. However, a user cannot transfer money back to his/her account, and transactions involving withdrawal from Paytm to another system are not permitted.
This is a step further from closed wallets like Ola Money, where the money circulates solely within the system, and can only be used with the parent merchant. In this case, money can be added from a bank account, but may then only be used to pay the organisation that offers the application. There are no stakeholders beyond the customer and the service provider. Yet again, the seller may transfer money back into the account, but the user is constrained by the service.
On the other end of the spectrum, open systems like PayPal allow every kind of transaction between the wallets. PayPal works predominantly with US Dollars, but money can change hands from different corners of the world, with a free current between the wallet and the bank account. While this is more user-friendly, security decreases from open to closed systems. Paytm and other semi-closed systems manage to strike the perfect balance between being easy to handle and ensuring security. They are thus the most common avenue for consumers and service providers alike.
Paytm was a solution that users embraced, but the government had something brewing, too. Amidst the chaos precipitated by the demonetisation drive, the concept of UPI was introduced in a bid to assuage the bonfire that enveloped the country. The User Payment Interface allows for direct exchange between two bank accounts with the application merely acting as a mediator. Each user is allotted a unique ID, which is attached to the respective bank account. Apart from this, mobile numbers also connect to the same account.
As with all matters regarding money, security is a pressing concern which the system seems to have taken care of more than adequately. Rather than handing out an individual’s details, UPI uses a repository which safeguards the information, while Personal Identification Codes (PINs) are the actual delivery guys. To set a PIN, the user needs to provide the phone number that is tied to his/her account, thus linking all three of them together. With every transaction, an OTP seals the deal. This entire procedure manages to tie transactions to the UPI ID. Though the bank is involved, the ID acts as a veil with the PIN, phone number and OTP guarding it.
This high level of safety has endeared the UPI to most digital wallet apps, which now offer both wallet-to-wallet and bank-to-bank services. Mobile wallets do not risk bank details, but the wallet itself is governed solely by OTPs, making them more unsafe.
Google is evident in its goal to stage coups in every arena it manages to touch, and introducing Tez in 2017 was an unsurprising yet highly strategic move. The economy was still reeling from the absence of notes worth 500 and 1000 rupees, and it was fertile ground. Gimmicks like ‘cratch cards and the Diwali stamps only helped their cause. Complete with UPI, Tez or Google Pay is now a staple on almost every mobile phone and is one of the most widely accepted methods of digital payment for everything ranging from simple shopping to household bills.
Mobile banking certainly has many virtues. There is, however, one glaring issue that often makes it unviable. Payments depend on making quick connections with banks, and bad Internet often leads money into the hazardous position of being debited from the customer, but not credited to the shopkeeper’s account.
You suddenly remember that one thing that you always forget to buy and head back with a groan. This time, the circle decides to occupy the screen a little longer, and you use the time to shove your purchase into your bag. Suddenly, a message pops up, making you glance to the top right corner, where it indicates that you have no data connection. Your wallet finally gets some love, as you hand over a few notes, and begin the march back, when, another notification makes your eyes widen. “Account XXX has been debited with…”. Nobody cares for your sound of exasperation as you turn around, yet again.
~ Written by Ankitha Giridhar for MTTN
~ Edited by Naintara Singh
~ Featured image by Ansh Bhagania