There are two main challenges when it comes to cross-border payments in India. The first one is working with the vast networks of financial instruments, like its issuer and other networks to make sure that bridges are built to support as many different instruments as there are. At the core of payments, any payment aggregator has to have integrations with all these institutions. In this way, irrespective of the country, the consumers find it convenient to go ahead and pay the merchant. Thus, the burden gets taken off the merchant who does not need to worry about the bank through which the payment is being issued or which currency the operation is in.
The second challenge is compliance with the country's regulations. Every time a cross-country transaction takes place, it also involves a whole bunch of compliance regulations that need to be done such as AML or CFT guidelines. So how does one ensure that the necessary checks and balances are in place for allowing only legitimate transactions while simultaneously blocking spurious transactions? PayU has partnered with Whibmore as a technology provider as they have built sophisticated fraud machines that check whether the compliance rules are valid. It also verifies whether the transactions are valid, or they need to be red-flagged and we have to wait, somebody has to go take a look at these transactions and what further actions have to be taken. In such cases, it is vital to let people know, at the time of the transaction, to inform them of complex transactions, or provide them with an option to block it.
The main problem of supporting these solutions is not just cross country. Even within India, the sheer number of banks that you have to work with is a large one. In addition, in terms of tech and infrastructure, they're constantly changing. If a customer is traveling to a region like Jammu and Kashmir, they should be able to use their payment instrument to make a sale purchase.
UPI in India has achieved two things. Firstly, it pushed merchants to adopt digital transactions at a significantly faster rate. End customers are now more comfortable because whether it's online or offline, everyone now has QR codes almost everywhere. But the bigger thing UPI did is getting a lot of small merchants into the banking net, which was either under-served or not served before.
In reality, the case wasn't that people never opened an account before. The truth is they didn't feel the need for it in the past. This creates a lot of opportunities for customers to look at a lot of other financial products. A simple example would be lending needs. Previously, if people had to borrow money, it was usually at stringent interest rates. But now with their history of banks, it's much easier for people to look at creditworthiness, and lend at much more reasonable rates. Adding technology to this makes it easier to solve lending at scale. One can make decisions, can do much more targeted notifications to users and work with them to minimize defaults. With the number of options that it creates for people to take advantage of in banking, UPI now creates a great platform. And in turn, that boosts the economy.
PayU does analytics and works closely with a few companies to provide analytics for them. Most of the big companies have their own analytics, thus most of the data that PayU receives is already there. When it comes to anomaly transactions that PayU encounters across sites, the real challenge is to notify such things to the government. Currently, PayU is attempting to build a central repository of doubtful transactions or any other data received based on analytics.
In addition, analytics is also used for marketing purposes. An important use case is how merchants are using which products or what products they can use and what they can get from those products. PayU can analyze this through its in-house data. On the basis of the analytics collected, PayU can start recommending to its sales team the areas which can be worked upon with these merchants to help them offer the products to their end consumers.
Currently, PayU is focusing on building a platform that can last for the next seven to ten years. The objective is to establish a truly distributed model, because the amount of digital financial growth happening in India is tremendous. With the introduction of UPI and more people entering the banking sector, nowadays almost any big merchant needs to have an online presence. This is also allowing companies to create a lot of financial products and people are starting to switch over to using these products. PayU is therefore building a robust platform to ensure that these requirements are constantly met in the years to come.
Watch the full episode here :
https://www.youtube.com/watch?v=PSIbHNyTk9U&list=RDCMUCRf6fzq1SAI0hc4WN4elCdQ&start_radio=1
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