In response to a paper published by the US Federal Reserve, or the Fed, Google recommended that they should replicate India’s Unified Payments Interface (UPI) model for its proposed interbank real-time gross settlement (RTGS) service.
Launched in 2016, UPI is India’s flagship real-time payments platform which allows users to transfer money directly from their bank accounts.
The UPI system is built in such a way that its world across multiple bank accounts without revealing the bank details of one’s account to the receiver when transferring money.
In 2019 itself, UPI clocked 1.2 billion transactions. It’s no wonder that Google cited that the Feds too should use a platform similar to UPI to enable effortless and transparent transactions.
The Google-Pay Connection
Google’s advice to the Feds comes from launching Google Pay – Google’s payments app which utilizes UPI in India.
For this to happen, Google partnered with regulators and the payments ecosystem to drive and scale UPI usage through the Google Pay app. Now, Google Pay not only serves as basic payment services such as peer-to-peer or peer-to-merchant, but it also enabled the way for value-added services such as instant loans, cashback, and rewards collection.
Why Should the Feds Use UPI?
Google recommended that the Feds pursue a similar model of open payments so that private firms are given the flexibility to combine their forces to come up with unique solutions that can cater to the evolving needs of the end-users.
The UPI is an interbank transfer system that operates in real-time. It is also ‘open’, which means that technology companies can build their application on top of the UPI interface that will help users directly manage their transfers into and out of the bank.
This means that UPI’s system allows banks, e-wallets, and payment service providers to connect to the platform and build services on specific mobile applications. It also functions as a payments gateway for several websites.
