Sustainable Payment Ecosystem for India
Recently, we had to ask strangers riding the bus to lend us some cash.
In August 2022, Grid Design Studio held an in-person 24-hour Designathon, where we were provided a platform to experience design problems. Our design brief was: “Design for Sustainability.”
This is a recap of our design process and approach to solving a steaming problem at hand we felt at the time.
Discovering the Problem Space 📝
While travelling from Roorkee to Gurgaon for this designathon, 4 of our friends travelled wallet-free, only to find ourselves in a cash debit later to pay the fare for our bus ride.
The conductor refused to accept UPI or card payments. Things got so bad that we had to ask strangers riding the bus to lend us money, which we paid back through UPI.
This incident led us to decide to Make the Payment Ecosystem Sustainable.
If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and five minutes thinking about solutions. ~Einstein
Major areas that we were eager to address in this problem space were:
- Using online payment methods when you don’t have an internet connection.
- Making a payment in cash when you don’t have enough of it.
Mobile Payments without an internet connection 🛜
India has not completely transitioned to becoming a “cashless economy”. While digital payments, digital transactions, and digital financial services have increased manifold, they have been unable to replace the traditional and prevalent cash-based transactions.
Large swathes of people in India still cannot use Internet-driven services and, therefore, do not conduct digital transactions. Moreover, there’s still a trust deficit in using device-based digital transactions and a lack of financial literacy, among other factors.
Through secondary research, we found that 55% of people use UPI daily to transfer money. 40% of UPI users have faced internet connectivity issues at least once, which leads to failed payments, trapped money, frustration, and anxiety.
It also creates a helpless situation where a person with money in their bank cannot pay. There isn’t always an ATM around to withdraw cash from, and many digital payment users tend to go out cashless for the sake of minimalism.
Our Proposal: Offline Wallets in UPI Apps
We chose Paytm as our demo app since it has a vast database, and unlike PhonePe, its wallet is not limited to Paytm-only in-app transactions. It also has a lot of government support, so we felt we made the right choice.
Near Field Communications can save us from another UPI failure. It is a proximity-based wireless communication standard. Unlike Wi-Fi or Bluetooth, however, NFC interaction is limited to an extremely short range.
Our solution works as follows:
- Users can pay this money through the “tap-to-pay” technology, just like the one in many debit and credit cards. An assumption is that the seller has a POS machine handy to accept these payments.
- When a person adds money to their Paytm wallet, it converts into an offline token ( just how Apple cash works), and as soon as they go offline/ low-network zone, they can see this amount in their offline “NFC wallet”.
- The payment goes to the seller’s Paytm Wallet, which can be easily transferred to their bank account through Paytm’s SOP.
The transaction is verified through an SMS to the sender and receiver. Hence, another assumption we took here was that a mobile signal is present while making a payment. Without Mobile Network, this transaction wouldn’t be authenticated.
Apple takes a similar approach with their Apple cash system for sellers. Still, it is restricted to only iPhone users and unavailable in India, which comprise only 4% of Indian population as of today.
Another interesting fact: 99#, a USSD-based mobile banking service of NPCI, was initially launched in November 2012. UPI is now available for non-internet-based mobile devices (smartphones and basic phones ) as a dialling option (99# ) and is known as USSD 2.0, although it’s limited to Rs 200 per day.
Make a payment in cash when you are not taking it with you.
According to a 2019 report by the RBI, cash accounts for nearly 50% of all transactions in India, adding that the number went further north, up to 70% for transactions below Rs 500.
For many petty jobs, like fixing your sandals, you need cash to pay the mochi. Or, while travelling on intercity buses, you need cash to pay for the ticket. Or when you want to travel via Delhi metro, the list is very long! There are many vendors and small-scale shop owners who rely on daily cash earned in the country.
With UPI in our phones and IIT Roorkee being a no-cash zone ( yes, even rickshaw drivers and tailors need to have a UPI setup), we have lost touch with cash payments. It creates a hassle when we come in touch with reality later when we carry no cash.
We’re not encouraging people to carry cash, but I’m sure many of us have faced the uncomfortable situation when we fall short of cash in our wallet and sometimes resort to asking strangers for help!
Our Proposal: “Emergency Cash” in UPI Apps
To combat this issue, we introduced a new feature in UPI Apps, “Emergency Cash.” Again , we used Paytm as a demo app for our solution showcase.
Let’s say person A wants some cash and opens the request cash button on Paytm. They can request the cash from anyone who has turned on the “I have cash in my wallet” feature.
The best place to keep this feature would be the Paytm wallet since it already provides a sense of security to the users. People can record whatever amount they like and will be notified of relevant requests.
The person can set the amount they need and the range to look it in for, but the exact range values need to be considered. We didn’t go into those details during the designathon.
Then, A starts searching for people who have registered for the cash exchange program. When they find someone (say B), they can agree to share a live location, and person A pays Paytm to hold the money.
Person B then gives the amount to person A, who marks it as received. Finally, Paytm releases the stored money to person B. This is the sound old escrow system!
Cases like multiple requests to lend cash, not enough cash on one person, and how chat can be automated to reduce waiting time per request were some areas we didn’t ponder much for now.
These need to be addressed while shipping the feature but can be figured out only after proper research and user group analysis. Due to the time crunch decided to leave these questions unanswered.
Final Thoughts, Signing off 🎉
Reducing Physical Card Usage to reduce plastic waste
An average bank card has a carbon footprint of about 150g CO2-eq. It’s about five plastic bags made with high-density polyethene. We were tempted to solve this issue for the environmental sustainability of the payments system in India.
After understanding the Fintech ecosystem and some hours of research, we realised that Apple Pay had revolutionised card payments in the West. Their Wallet app lets you add your card in one place. Since Apple stores data within the device through Face ID and Touch ID, it eliminates the need to carry your physical cards.
In India, however, the NPCI accepts biometrics and data only when UIDAI, a government agency, validates them. Hence, CVV is required every time you make a card payment. That is also a significant reason Apple Pay is unavailable in India.
We kept spiralling back to a wallet-app-based solution but couldn’t eliminate CVV from the picture unless the government introduced another reform ( like Apple’s Face/ Touch ID). Hence, there was no way to eliminate physical cards from today's picture.
However, we found an interesting statistic related to the introduction of UPI payments and debit card usage. The need for debit cards is diluted by UPI-based authorisation, as opposed to card and PIN-based authorisation.
NPCI will commence a pilot project enabling credit cards on a unified payments interface (UPI) over the next two months. (Update: On 21 Sept 2022, NPCI posted an update on their Youtube channel)
As of December 2023, the Reserve Bank of India (RBI) has allowed users to link RuPay credit cards to Unified Payment Interface (UPI) payment applications. However, as of May 2023, only five banks have gone live with the facility: Union Bank of India, Indian Bank, Punjab National Bank, HDFC Bank, and Canara Bank. Visa and MasterCard credit cards are not compatible with UPI payments.
Overall, we could think about upcoming solutions in the Fintech sector. With credit cards getting an opportunity to be linked with our UPI ID and the upcoming UPI 2.0 a month after this project was done, it gives us immense satisfaction and a sense of joy that we were, in fact, able to predict the market trends in 24 hours!
Looking back, 2 years later
Through this project, I understood that passion instils creativity. Although Rishabh and I have concluded that such a project is bound to be ironically unsustainable, its success depends on the cash flow in the economy, which the government is trying to reduce.
Hence, the solution has been designed to be discarded. It could only be sustainable if cash remains an irreplaceable part of the economy, which is a by-product and not a goal of the moment- although some people would disagree.
Even then, I’m reminded of this project each time I’m low on cash when the service provider accepts only cash- not just in India, but even on my trip to China! (Oh, the things I had to leave behind because we didn’t have enough cash 😮💨💸)
It points to one thing for me: that payment ecosystem still has a long way to go before becoming as simple as the click of a button! And as designers, it is our task to brainstorm ideas and bring them to life for our users 👐
Tell me your thoughts on this. Till then, see ya on the next stint 😎
