As a financial services digital innovation, the Unified Payments Interface (UPI) has had the biggest impact on the democratization of rapid payments and is likely to play an important role in shaping future value transfers. To power the massive amount of UPI and overall digital payments, transition to cloud native infrastructure is the need of the hour. It is also essential to scale and grow without downtime.

As per the data released by NPCI, the volume of UPI has almost doubled from the previous year to over 6 billion transactions in July 2022 with transaction value exceeding INR 10 trillion. This rapid growth in digital payments and UPI has forced banks to ‘refresh’ their payments infrastructure investments over the past several years – a complex and difficult change each time. The traditional payment structure of Indian banks is under severe pressure, as transactions are not evenly spread across the spectrum.

As a response, banks should prepare their infrastructure to meet peak demand in real time and ensure that transactions do not fail and remain secure. While payments is a high volume – low margin business, it has a high potential for customer friction – failed/delayed payments or fraudulent payments. Such instances have a huge impact on the customer experience and can have regulatory implications. These drivers are forcing banks in India to invest heavily in payment modernization.

What should payment modernization programs achieve?

Any payment modernization program for a bank should have three elements. First, payments must always be current and fast – payment platforms need the elasticity to manage volume fluctuations and provide real-time processing at high volumes and short response times. Second, payments must be more secure – banks must develop the ability to access real-time intelligence, evaluate high volumes of data streams, and develop AI/machine learning and rules-based fraud risk management engines. Finally, payments need to generate ‘actionable insights’ to allow banks to more effectively monetize transaction data and create hyper-personalized offers to generate new revenue streams.

To help banks modernize their payments platform, Google has launched a cloud-based payment gateway to process UPI based payments and for volume growth, without the increasing complexity of managing infrastructure and software solutions. Helps banks to meet uptime and scalability requirements.

Cloud is key to modernizing payment platforms

The cloud platform enables banks to embed agility – banks can focus more on creating value for customers and less on transaction processing and infrastructure maintenance. The key dimensions of such cloud based agility are mentioned below:

1. Infrastructure Agility: The cloud can help banks scale their payment structures up or down to match fluctuating volumes; eliminating the need for high-cost investments, system upgrades and asset depreciation; Variable the cost of infrastructure; and free-up underused capital.
2. Insight Agility: Payment transactions generate large amounts of data that are best managed on the cloud by leveraging built-in AI and machine learning; And is accelerating insight generation significantly. It enables better lending, loan appraisal, fraud detection etc. to provide profitable growth and more.
3. Partnership Agility: Cloud platforms make data exchange easy. This enables banks to quickly establish new partnerships and provide live streaming data access to create a strong ecosystem innovation drama using microservices-based architectures and distributed databases.
4. Product Agility: Cloud platforms enable banks to respond quickly to changes in customer demand by powering smaller, faster, iterative releases, significantly improving speed and cost-to-market, as well as unlocking new revenue streams help.
5. Compliance Agility: Cloud native platforms make it easier to respond to regulatory changes in the payments landscape, efficiently deal with emerging internal and external security threats, and develop better rules-based fraud risk management engines.

Over the next few years, as the volume of digital payments continues to grow rapidly, banks need to make effective strategic investment choices to build modern payments infrastructure, migrate to next-generation platforms, and scale the future. But prepare for disruptions (for example, central bank digital currencies). Banks will be better positioned to take advantage of cloud-based payment platforms to process payments faster and more securely; And at the same time, improve their ability to connect and integrate different data sources and deepen customer relationships. Fast-moving banks have an opportunity to rethink how cloud technology and infrastructure can create a competitive gap and create a whole new world of banking by truly taking advantage of the UPI opportunity.