In a circular, the RBI said that the National Payments Corporation of India (NPCI) will facilitate integration of the Unified Payments Interface (UPI) platform with all banks and ATM networks. While the UPI would be the mode of customer authentication, the settlement would continue to be through the National Financial Switch (NFS), which forms the backbone of ATM networks in the country.
Most of the other rules, including those pertaining to withdrawal limits on third-party ATMs, would be similar to regular card withdrawals on ATMs. Several banks are already providing a facility for cardless withdrawal to their customers using the bank’s mobile app. The new framework puts a common standard, allowing customers to withdraw from any bank.
The RBI does not see the cardless withdrawal facility doing away with the need for cards. RBI officials said this was an additional option and a security feature. There have been many phishing cases of fraudsters either cloning cards from data or placing devices over the card slot in the ATM to read the card information. UPI would eliminate such skimming frauds.
Another advantage would be the customers would not be inconvenienced even if their card issuance was delayed. Currently, banks face some issues with card supply because of a global chip shortage. This QR code withdrawal would be helpful if there is some large-scale re-carding to be done in the case of a data breach, as it happened in the past with some banks.
Speaking to TOI, the chief executive of an ATM company said that the rollout would not require any hardware changes and only a software upgrade would be needed. “It is not going to be like an app upgrade on a mobile phone, while the application can be pushed through remotely, there will have to be some testing on the client side,” he said.
According to ATM operators, while customers would not face any additional charges, the new facility would marginally increase the cost of ATM transactions for banks. “Earlier, when an account holder withdrew cash from his own bank’s ATM, the transaction happened within the bank’s network. Now, even for own-bank transactions, there will have to be one leg of the transaction which travels to the UPI platform,” he said.
Bankers said that debit cards would remain relevant as they are used for more than just cash withdrawals. While QR code payments are picking up for in-store payments as well, there are many transactions for which cards are used. Currently, more than half of the card transactions in India are for ‘card not present’. These pertain to cards on e-commerce sites, utility websites or mobile apps. A senior banker said that as a security feature, they would allow QR code withdrawals from their banking app. This would boost usage of their digital platforms. The bulk of the UPI transactions currently takes place through PhonePe, Google Pay, and Paytm.