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New Umbrella Entity (NUE) for Retail Payments: Implications on Banking Ecosystem

New Umbrella Entity (NUE) for Retail Payments: Implications on Banking Ecosystem

The payment ecosystem has grown massively in the last decade due to the work done by RBI, NPCI, Banks, Fintechs, and the entire ecosystem. Banks have been investing heavily in infrastructure and technology to support payment products including RTGS, NEFT, UPI, IMPS, AEPS, BBPS etc. This has improved the life of retail customers with multiple options being available at low costs. Most smaller banks have not been able to make payment business profitable.RBI has now come up with New Umbrella Entity(NUE) for Retail payments to de-risk the dependency on NPCI. The licensing and implementation of the first set of products NUEs would take nearly 2 years and some big names are in the fray.

We believe that the roll-out of NUE will have an adverse impact on most banks except payment leaders. The key reason for adverse impact includes:

  • Capital Investment: All new payment product rollouts typically expect new technology and infrastructure deployment on bankside with enterprise licenses. This cost would be upwards of 150,000 USD in most cases. To ensure that these payment products are available, there would be additional efforts to securely rolling out these APIs externally.
  • Operations / Settlement Management: The addition of each new payment instrument, dramatically increases the operations and settlement efforts on the bank side.
  • Increased Risks: We have seen banks losing money due to reconciliation and security issues on payment platforms. The addition of new products by new NUEs would exponentially increase the risks.
  • Liquidity Costs: To support the free flow of funds by customers, banks would have to increase the liquidity to support each of these products.

Revenue impact: Payment instruments have largely been moving towards zero pricing. We believe that this phenomenon would continue in future.

As smaller banks would be pushed to deploy these payment instruments, they will end up bleeding every time they will add new products. Assuming that 3 NUEs would at least launch 2 new services every year, banks would end up spending 1 million dollars to support this. We have to find a way to solve this.


  1. I believe such disruption should come to the market. First of all customer will have multiple option for their payment transactions. Now from banks perspective, yes smaller organizations are going to bleed but probably thatnis the right time for consolidation to build a sustainable financial system.

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