UPI Circle – A key step towards making digital payments inclusive and ubiquitous in India

With the National Payments Corporation of India’s (NPCI) launch of UPI Circle on 13 August 2024, India’s hugely successful digital payments market, which is a thriving example of how digital transformations can impact a nation’s economy at a massive scale, is going to witness yet another seemingly simple but potentially disruptive feature: Delegation of Payments.

In this article, we will broadly explore the impact of this new functionality, the potential opportunities it offers to financial institutions, and how Oracle is uniquely positioned to help banks and financial institutions optimally utilize these opportunities.

So, what’s UPI circle?

Delegation is an enabler to achieve true leadership as the one who delegates is essential but less involved. UPI Circle aims to leverage the concept of delegation in everyday banking to empower those still outside the purview of digital payments.

With UPI Circle, a primary user of the unified payments interface (UPI) who has an associated bank account, will now be able to delegate payments using mobile apps to someone they trust who will also need a UPI ID but may or may not have a bank account.

UPI Circle allows partial or full delegation. Full delegation enables the primary UPI user to delegate the payment by setting a transaction limit so that the secondary user can pay any amount up to the limit set by the primary user. Partial delegation means that the primary user needs to approve the transaction with her/his UPI PIN.

And what does UPI Circle actually mean to end users?

Be it in personal life or business, ecosystems play a significant role and payments form the common fabric across these ecosystems. The UPI-based payments ecosystem in India has revolutionized the country’s financial services landscape as more than a billion people across India conduct more than 450 million financial transactions a day. Everyone, in one way or another, is touched by digital payments in their day-to-day lives.

However, despite the apparent ubiquity of digital payments, there exists a gap in this space that UPI Circle aims to address.

To understand the applications of UPI Circle, consider some of these real-life scenarios: 

1. Today, financial freedom has become the real freedom for kids/teenagers to lead a fast-paced digital lifestyle. However, parents/guardians would prefer to monitor and control their spending without having to interfere in every single transaction that the dependent undertakes. Delegated payments empower kids with sufficient financial freedom, while enabling effective monitoring and control.
2. Some elderly, who are adept at using smartphones, may think twice before making digital payments as they may be wary of frauds or of making mistakes during transactions. Delegated payments can help them confidently conduct transactions and appoint a primary user, who can be someone they trust to oversee and check their financial transactions.
3. Small and medium business owners typically are hard pressed for time and their receivables and payables are an everyday challenge. With delegated payments, business owners can entrust their employees to make payments on their behalf, an extension of the concept of corporate credit/debit cards but far more convenient and secure.

These are just some scenarios; there can be many more such applications of the functionality that can potentially make UPI Circle delegation of payment a game changer.

What does it mean for the banking and financial services industry?

UPI Circle presents an opportunity for financial institutions providing banking and payment services to embed themselves into their customer’s lifestyle in a more seamless manner. UPI Circle allows banks and payments service providers to deepen their engagement by extending their services to their family members, thereby tapping into a previously unserved segment by offering family banking as a value-added service.

Deeper and more meaningful engagement with customers also means gaining significant insights on actual spends of their primary customer, thereby increasing opportunities for contextual cross sell. Banks can gain insights into the spending patterns of their customer and can proactively engage with them to provide advisory services and recommend tailor-made products.

Banks can provide additional value by offering Gen AI-based spend analytics and personal finance management features where a primary customer can get a comprehensive view of their delegations and the spending patterns of their delegates. A similar experience can be provided to the secondary user to give insight on spends by them.