UPI Brings Contactless Payment Via NFC; Challenges Mastercard, Visa’s Dominance
As per the reports, the National Payments Corp. of India (NPCI) is preparing to provide Tap-On-Go facility by implementing near-field communication (NFC) to its payments infrastructure and further negotiating with payment aggregators to push the product across point-of-sale (PoS) devices.
How Will This Help?
With this move, NCPI which also operates the Unified Payments Interface (UPI), is aiming to expand UPI’s reach to offline merchants by tapping the PoS ecosystem and thus trigger more peer-to-merchant transactions.
Further, the NFC capability will help UPI to take on rival private payments networks, including Visa and Mastercard.
As we all know that card networks have been expanding their contactless payments network based on NFC over the past year through tap-on-go payment systems.
Currently, card networks are using the tap-on-go facility through NFC-enabled cards, which allow users to pay at PoS terminals, by tapping the card, instead of swiping it.
So with the implementation of NFC, UPI will easily able to compete with cards like NPCI-operated RuPay, which offers similar services.
What Is The Plan?
To make it work, NPCI is planning to directly embed this function into NFC-enabled smartphones and is expected to reach out to manufacturers.
Sources also mentioned that the company plans to deploy NFC-enabled UPI service at large-format stores.
A senior banker said, “After spreading the network quick response codes in the market, NPCI wanted to target the 5 million PoS machines in the country, which are also doing well and registering high-value transactions. Enabling NFC on UPI was the only way to tap into the PoS market and increase the value of payments transacted on the UPI network. However, it will face resistance from offline payment aggregators and PoS manufacturers,”.
Currently, Visa and Mastercard have strong partnerships with banks and PoS providers, and also provide added incentives to banks for setting up PoS acceptance infrastructure, according to the banker.
So far no response came from NPCI and Visa on this subject.
Obviously, PoS manufacturers and offline payment players didn’t show much appreciation for this move as they already have strong alliances with card networks and will now be challenged.
Further, the banker said that it is yet to be seen how NPCI incentivizes the offline payment ecosystem to adopt this offering.
Once users tap on the NFC-enabled PoS device, the new UPI service will prompt smartphone users to choose their preferred UPI payment app and enter a pin to make payments on their device.