India’s central bank has scrapped plans for a high-profile project aimed at rivaling the country’s main payment system, the Unified Payments Interface. The project has attracted significant interest from various leading conglomerates, technology giants and financial institutions including Amazon, Reliance, Facebook, Tata Group, Google, HDFC and ICICI.
The Reserve Bank of India had originally called for tenders for a license to operate a new retail payment and settlement system across India in 2021. This project was called New Umbrella Entity (NUE).
However, according to RBI Deputy Governor T Rabi Sankar, potential participants in the project failed to propose “innovative or infrastructural solutions”. Sankar emphasized central banks’ interest in exploring ideas that go beyond incremental improvements and replacements for existing technologies.
Currently processing more than 8 billion transactions per month, UPI was edging closer to its 1 billion milestone in 2021. The central bank has strived to develop alternative protocols to mitigate concentration risk as his UPI continues to grow in importance in the economy. Overwhelm existing systems.
Industry players formed four consortia and planned to bid for NUE licenses.Image: Bernstein
PhonePe and Google Pay accounted for the largest market share in UPI in 2021, but did not change significantly. Many in the industry saw NUE as an early and proactive way to adapt to new payment systems.
In previous proposals, RBI required that NUE be interoperable.
“Therefore, NUE does not have access of its own. However, NUE can customize the network to suit its business model and delivery capabilities. UPI has a market share cap/adjusted growth for new players (e.g. WhatsApp) NUE has no such restrictions and can help accelerate network effects for private players Therefore, NUE’s customized design and self-governance can provide more powerful capabilities.Unlike UPI’s general payment network, NUE has a customized network based on use cases. ,” Bernstein wrote in a 2021 report.
