April 1, 2021

Road Trip Through Financial Inclusion Part 2: UPI and GPay Transcend India’s Urban and Tourist Hot Spots

by Steve Haley in Financial Inclusion , Fintech , Mojaloop 0 comments

In this second of a three-part blog series, Steve Haley, Mumbai-based Director of Economic Development, continues his documentation of how Unified Payments Interface (UPI) is spreading across India faster than the credit card scheme ever dreamed of. On his six-week road trip, Steve’s second stop was in Gokarna, Karnataka, a quieter area than that of Agonda, Goa. Would digital payment options be any less prevalent?

This series covers my firsthand experience with the rapid growth of digital payments in India and the resultant increase in financial inclusion as I visit three unique locations on a six-week road trip with my wife. If you haven’t done so already, please read part one of this series before going any further. I go into more detail introducing myself and some of the main ideas below. If you choose to skip it, here is the too-long-didn’t-read version.

I’m a payment interoperability advocate

I am a staunch advocate of payment interoperability thanks to my experiences observing the progression of credit card and mobile money availability in different parts of the world. It started with the most affluent but never reached the most vulnerable. 

My (middle-class) payment bias

One of the results of this is a bias towards convenient payment methods. We see this especially in the middle-class, including myself. I demonstrate more of this bias in my first blog than I do here. So, I guess I’m growing.

About UPI and 3PPI/PISP

Lastly, 3PPI (3rd Party Payment Initiation) functionality is fueling widespread adoption of UPI (Unified Payments Interface) – India’s interoperable real-time payment network. 3PPI is the functionality that enables a Payment Initiation Service Provider to interact directly with the end-user, or account holder, to request the transfer of funds between two financial institutions connected via a real-time payment network. You can read more on the short blog we recently posted or check out this white paper we recently published with Google.

Okay, you’re caught up.

Our first stop was Goa, a tourist-centric destination on India’s west coast. There, I discovered to my amazement that Google Pay was available nearly everywhere we went. But this was Gokarna and I expected that our experience would be much different.

Walking (the beach) to a different beat 

Gokarna, Karnataka is a short 130-kilometer drive south of Goa. Yet, despite the relatively close proximity of the two areas, you would be hard-pressed to find two neighboring regions with fewer commonalities. Goa’s history as a hippie enclave with former-Portuguese-Catholic roots is in stark contrast with Gokarna’s place among the seven most holy Hindu sites. As we walked the three-kilometer stretch of beach from the town center, we passed through five clearly distinct groups: middle-class Indian families returning from visits to important temples in the area, young Bangalore startup types enjoying a long weekend retreat, 30 and 40-year-old eastern Europeans enjoying the “backpacker experience,” pundits in their dhotis and dreadlocks wandering the beach, and finally, the fishermen repairing their nets well into the night. 

Our Airbnb was just inland from the fishing village in a beautiful airy farmhouse (with excellent wifi!). Luckily, there were three little stands within walking distance selling snacks, veggies, and basic essentials which served us well for breakfast and a few lunches. However, none of the locals spoke English or Hindi in this region and we found no signs of digital payment options. It gave me the impression that there was an informal “pay me later” relationship with their regulars. Does that count as cashless? Probably not. Cashlater, maybe.

In any case, it was apparent that the presence of other Mumbaikers and Western tourists was nil compared to Goa, so I was curious to see how that would affect the payment options available in Gokarna’s tourist areas. 

Perhaps it was the distraction caused by our people-watching activities or the lessons we had learned in Goa subconsciously affecting our decision-making, but at this point in our visit, we still had not bothered to find an ATM. (Spoiler alert: Gokarna has three.)

First sightings of UPI

Baghavan Cafe

On our first foray to the beach, we walked further than expected and found ourselves in desperate need of refreshment. However, in dramatic fashion, we had left our wallets at the hotel and only found 110 rupees ($1.40) in our pockets (seriously, not just to make this an interesting story). In the stretch of beach between the gurus and Gokarna’s European guests, we found the aptly named Baghavan Cafe. I was rejuvenated with two thoughts: I was sure we could find Sheela hiding out here and this looked like the kind of place where our pocket change might at least get us some water.

GPay QR and identifier printable from your phone

That’s when I saw it. No, not Sheela. Even better. A laminated poster with a big QR code printed on it. After my experiences in Goa, I knew right away that we were saved.

The waiter spoke very little English or Hindi, but he did know “Google.” Our hope for water was replaced with a desire for fresh watermelon juices and an excellent seafood feast. The restaurant had just received its laminated QR and the workers were very proud of it. They no longer required their customers to go through the “tedious” process of entering a phone number. We would discover later that this approach is the intermediate step for a merchant to accept UPI-enabled payments. It’s somewhere between a napkin with a phone number on it and an official plastic BHIM (Bharat Interface of Money) QR table stand like the one we encountered at The White in Goa.

A quick side note to payment system designers: I have been impressed by the simplification of UPI’s staged merchant acquisition process. This poster included not only the QR and the UPI address (functional on all UPI apps) but also the phone number and Gmail aliases for those using GPay. Lastly, and most importantly, it prominently displays the name of the cafe for the customer to quickly verify the receiver. 

At the end of our meal, the only thing the staff thought odd about my use of GPay was that I was so interested in it. We decided that if GPay was good enough for Bhagavan, it would probably be good enough for others and decided to delay our hunt for an ATM.

Real-life examples of rapid adoption and universal access 

Cards to cash to GPay before you can say “millennial startup hipsters”

For dinner that night, we ventured another 300m from our hotel to the Sunset Cafe to find hipster paradise among the Bangalore youth. The team was welcoming and fun to talk to. The aesthetic was clean and urban, and the owners clearly knew their customer base as teams of 20-somethings were gathered around laptops planning the next Zomato app. Here, we weren’t surprised to find that UPI payments were accepted. 

After a non-alcoholic beer and limited non-veg snacks (Toto, we’re not in Goa anymore), I spoke to the owners about their experience running a shack. They were themselves young urbanites with a business that catered primarily to middle-class youth in their restaurant and 10+ hostel rooms. They had a decent revenue stream but seemed like a passion project for them. 

All of their guests were clearly fully banked, and the guys had tried several options for card acceptance. The Reserve Bank of India has a limited merchant discount rate, but if there’s one thing I know, the card scheme will find a way if it’s profitable enough. I learned that unless they physically went to the bank to settle their account at the end of each day, the bank charged them a 3% penalty on all transactions. This process had grown too onerous and expensive, so they stopped accepting credit cards last season. 

With only three ATMs in Gokarna, guests became quite annoyed. As a result, the business started accepting GPay just three months before my visit. Only once or twice in that time did someone want to pay with a non-GPay UPI. In those situations, they had dug out the UPI address on their app and helped the customer through the transaction. 

Me: “So a lot of people want to use GPay?”

Sunset Cafe: “Everyone”

Me: “Come on, everyone?”

Sunset Cafe: “Bro, we went from being 100% cash-based three months ago to 80% GooglePay now. So, yeah man, everyone.”

They estimated that they could get the last 20% of their customers to switch to digital payments if customers had an option to swipe a credit card directly to the company’s GPay account. At this, I recommended they inspire their patrons to abandon the next Zomato and get moving on a UPI-enabled version of Square.

Grouchy Spice Vendors

The next day, we donned our double masks and headed for Gokarna’s town center to visit Mahabaleshwar Temple. Unfortunately (or, fortunately considering the crowds of unmasked visitors), I wasn’t allowed entry as a foreigner, so we moved on for some outdoor shopping in the area. We found some dried figs that would last us until lunch and some local spices to take home. The unsmiling yet professional vendor was representative of others that we encountered in Karnataka. He curtly pointed to his QR sign after giving me the total. I decided against interviewing him about his experience with UPI but since he was no more congenial to the Indians using cash next to me I guessed that he was cool with it.

His plastic QR stand was more professional than Baghvan’s printed poster, but the handwritten trading name seemed sketchy. Oh well. He was comfortable with it, so I was too. The woman at the register called out what I am guessing was an approval message in Kannada. He grunted and I moved on. 

At least the figs were sweet. 

Digital Native Shopkeepers

Next on the list was the search for a Kali head that is meant to keep away the evil eye. We’ve seen them on many homes around our village. We searched an endless number of shops that served religious tourists until we finally found them in a shop that largely sold housewares and realized they were made of cheap plastic. The man running the shop (we’ll say “man” because we hope no child labor laws were violated) needed a bit of help reaching them on the top shelf but was amused at my interest in the piece of plastic and didn’t bat an eye when I pulled out my phone to scan the QR for the 150 rupee talisman. 

The future of shopkeepers: Digital Natives

He had both a PhonePe QR and the standard Bharat QR that we’d seen in the spice shop. Neither included the trading name. So, in the spirit of experimentation, I scanned the PhonePe QR. It was slower but I found it difficult to discern whether that was a result of my poor network connectivity or something on their end. Regardless, it worked just fine. This wasn’t surprising to me as PhonePe has been a driver of interoperability from its inception. I tried to ask him why he had both QR options but he just shrugged and smiled. When I paid, he didn’t look for a confirmation message on his phone. This either meant he trusted the system, trusted me, or didn’t really care because it wasn’t his shop. In any case, even with the 15-second delay, I’m guessing it was still faster than if we had to settle the correct amount of change.

Elegant French Bistros

We got some pretty amazing vada (ah, fried food) in the canteen of Someshwar Hotel, a very local downtown canteen (again “English – no. Hindi – no. Google – yes”). We headed back to our farmhouse AirBnB where I did one work call before heading out for our last dinner in Gokarna. Despite the absence of Mumbai’s upper crust driving digital payments as was evident in Goa, we had once again avoided the need to take cash from the ATM. We ate at Chez Christophe, Gokarna’s chic French bistro (with meat and wine – why hadn’t I found this earlier?). The cashier’s table was inside the restaurant with bad reception making any digital payment difficult. The cashier handed me the Bharat QR sign and sent me outside where the signal would be better. I remember thinking how funny this was. Somehow I doubted that he would have done the same with their credit card reader.

Real-time payments are a different game

Overall, while it’s clear UPI hasn’t quite hit the villages to the same extent it has in Goa, Agonda was definitely not an anomaly. UPI’s usage is spreading quickly. The real test would be our next stop in Mahabaleshwar, Maharashtra. It’s off the beaten path, inland, and receives even fewer tourists than Gokarna. 

But real-time payments and 3PPI have changed the game. It is spreading at the speed of demand, not waiting for big card companies to introduce it. That’s why we are excited to be partnered with Google to bring 3PPI to Mojaloop. Our goal is to help countries that lack India’s level of resources to achieve this scale of digitization. If you would like to learn more about Mojaloop or how we are driving financial inclusion in other countries, please contact our team today.

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