RBI shelves NUE, the UPI rival project: Here's why
What's the story
The Reserve Bank of India (RBI) has shelved its project to create an alternative for the Unified Payment Interface (UPI).
Dubbed NUE, or New Umbrella Entity, the project was supposed to alleviate the stress on UPI, which currently processes over eight billion transactions every month.
It makes sense to have an alternative payment system. So, why did RBI abandon NUE?
Context
Why does this story matter?
The National Payments Corporation of India (NPCI) is currently the umbrella organization for providing retail payments in India.
Many players in the payments sphere have pointed out the pitfalls of NPCI being the only authority in charge of retail payments. RBI and the government came up with the idea of NUE to address this issue.
NUE was expected to enhance competition in the sphere.
Bids
The project generated significant interest from major players
The RBI first invited bids to set up the new retail payment system in 2020. The central bank then extended the deadline in 2021 due to COVID-related disruptions.
The project generated significant interest from major conglomerates, tech giants, and financial institutions. Some of the names include Amazon, Reliance, Meta, Google, HDFC, and ICICI.
Interested parties had formed four consortia to make bids.
Put on hold
RBI put licensing on hold in January
Considering the interest it generated, it is surprising that RBI abandoned NUE. That brings us to the question, why?
Before the central bank shelved the project, it had put licensing for the project on hold in January.
RBI found the proposals from interested parties quite ordinary at the time. Neither were they progressive nor did they propose any significant technological advancement.
Reason
Potential participants failed to come up with innovative solutions: RBI
The decision to call it quits on the project is a continuation of this. RBI deputy governor T Rabi Sankar said potential participants failed to come up with "any innovative solution."
"The objective was to introduce an innovative infrastructural value-added facility into the system. Our digital ecosystem is already quite active and innovative, we just wanted to bring in new ideas," he added.
UPI
RBI aimed to increase the competition in UPI
UPI is managed by NPCI. In the last few years, UPI has become India's most favored mode of transaction.
Since 2021, PhonePe and Google Pay have been the market leaders in UPI transactions. Nothing has changed since then.
With NUE, RBI aimed to change that. Well, we can be sure that it won't happen any time soon.