India Loves To Talk, Get That Technology For Digital Payments

ATMs, bank branches, bearer cheques are back again
Demonetisation, remonetisation, economics
Debit cards, credit cards, wallets on your mobile
Paytm, Mobikwik, Freecharge and USSD too
White money, black money, new notes, old notes
Tax sleuths on the shores, India’s under cashless law
Longer and longer queue wars, I can’t take it anymore

We didn’t start the fire
It was always burning since the world’s been turning...

With apologies to Billy Joel

The last one month has been all about the currency withdrawal and exchange announced by the government, which triggered heated discussions all around on its merits and demerits. Enough has been said and written on the subject and I am not going to add to it. One thing is very clear that India will move towards increasing use of digital payments.

The payment wallet providers are thrilled and have gone to town with their solutions. The banks have reacted somewhat less enthusiastically, understandably so, as they focus on the huge logistical effort needed to take back two thousand three hundred crore notes from customers, issue new notes, and re-calibrate automated teller machines (ATMs). The government has also been very visible promoting the unified payment interface (UPI), and various other methods of to pay digitally.

There is however, one big problem. India may have over a billion mobile phone connections, but...

All solutions being presented right now are essentially for smartphones, and something called unstructured supplementary service data (USSD) touted as the solution for feature phones. Anyone who has used or tried to use USSD will tell you that it is complex, and hardly ever works.

To get a better sense of how narrow the service currently offered is, figure this. WhatsApp has an active subscriber base of 160 million in India. It is hard to believe that mobile payments are more common in India than WhatsApp is. That leaves us with a low ceiling of 15 percent of India’s mobile subscriber base. This too could be a high estimate as there are only one hundred million Indians with real data access. Further, data connectivity is an issue that makes transactions fail.

Keep It Simple, Use Voice

Imagine a simple and well-designed voice interface that one can call, say who we want to transfer money to and it is done. Payment by phone can truly become a universal option that all Indians with cell phones can use. We can get the system to support multiple languages and allow the user to use whatever language (s)he is most comfortable with. They will need a bank account that is linked to a debit card, but that is ubiquitous and getting more so by the day.

Can there be a solution which uses voice to transfer money electronically? Is it too hard, too risky or is there another problem? The answer is a resounding no. This article lays out the building blocks of a voice-driven solution envisaged as part of UPI. This will have all the security features that UPI has; resulting in a simple yet elegant solution that every Indian can use.

How Would This Work?

Let me lay out a simple case:

• Step1: Nimrat walks into her regular kirana (corner) store and buys her daily essentials. She needs to pay Rs 261 to the shopkeeper, Guptaji.

• Step 2: Guptaji has a card on the counter which has his ‘Pay by Phone’ number in big, bold letters. The number has been issued by his bank and is mapped to his bank account.

• Step 3: Nimrat calls the number and immediately gets a prompt asking her to confirm if she wants to pay Guptaji. On saying Yes (or pressing 1), she is asked to select which of her bank accounts (which are already mapped to her mobile number) does she want to use. She makes her choice.

• Step 4: The system transfers the call to the UPI server (remember this step, this is kind of important) and asks her to enter the amount to be paid and her ATM PIN. She enters the PIN.

• Step 5: The UPI system transfers the money to Guptaji and their respective banks send out SMS confirmations to both.

And we are done!

The system uses existing infrastructure to complete the transaction. The simplicity of UPI - no one-time password and no need for account details - is maintained while opening a universal channel for payments. The entire security protocol laid down by UPI - entering of the personal identification number or PIN only on the secure UPI server - is followed. There is some magic required at the back end to generate unique UPI virtual addresses and to implement this voice framework on top of UPI. But this is what true technology does – offer a simple interface to the user and handle all the complexity at the back end.

Where Could This Be Used?

• Buying a train ticket from IRCTC: select ticket, enter phone number and the system takes care of the rest.

• Ordering from a call center: place order and pay for it right away. This is a very important use case as currently paying on phone is almost impossible due to the one-time password requirement.

• Replacement for cash-on-delivery: package is at your door, receiving person accepts the delivery. The delivery person enters your number into the system and you can pay right away even if you are not physically present, which is an issue for card-on-delivery.

• Sending money to a friend: call your bank transaction portal, enter the mobile number, and the amount you wish to send.

• Paying for your Ola or Uber ride: driver already has your number, system generates the amount and you get a call to pay.

We can go on, but you get the point.

Why Hasn’t This Been Done Yet?

Yes, I can see you shaking your head saying - if this is so simple and powerful, why hasn’t it been done already? I don’t know. However, as I have laid out, this is very feasible and needs some voice hardware and development at the the National Payments Corporation of India (NPCI) to set up the voice infrastructure. Banks will need to do some additional work to develop their apps in a standard format like Voice Extensible Markup Language (VoiceXML). The technology needed to deliver this experience is already in place. By leveraging UPI or IndiaStack, the country can have a state of the art payment system that is simple for all of us to use.

We would be happy to lay out the technical details at the appropriate stage. I am sure that NPCI and the NITI Aayog are on the lookout and are having discussions with various parties to explore voice based systems and make universal electronic payments a reality. So irrespective of who they choose to work with, we hope that India gets an easy to use and universally acceptable payment system. Wouldn’t it be great if it is just a phone call away?

Postscript

Since this article was written, Paytm has announced a feature that allows payment by phone. There have also been a few other announcements on using feature phones for payments. On one hand, they support the argument made above and are good steps on the path towards truly inclusive and secure payment options. However, these are sub-optimal and are not universal in their scope. The need of the hour is not a voice interface for a wallet where loading money, security and inter-operability remain key problems.

It is also not about some isolated banking IVR system that somehow makes feature phone payment theoretically possible in a very closed environment. What India needs is a universal, flexible, open and secure payment mechanism where consumers and merchants will be able to transfer money seamlessly by using all phones including feature phones.

Sarbvir Singh is an experienced venture capital investor in India and was the founding Managing Director of Capital18. The portfolio of companies that he has worked with include BookMyShow, Yatra and Webchutney among others.

The views expressed here are those of the author’s and do not necessarily represent the views of Bloomberg Quint or its editorial team.