[HN Gopher] Why peer to peer digital payment system UPI should r...
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Why peer to peer digital payment system UPI should remain free in
India
Author : pvsukale3
Score : 67 points
Date : 2022-09-13 08:43 UTC (14 hours ago)
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(TXT) w3m dump (www.capitalmind.in)
| deepakshenoy wrote:
| Thanks very much! I would love to hear your comments.
|
| I think UPI is incredible and well loved because it's free -
| putting a toll on something moving at this insane speed is just
| going to slow it down tremendously.
| signal11 wrote:
| Hey Deepak, I saw your comments about this on Twitter, and it's
| good to see this article as well.
|
| Personally I don't think UPI will ever go to a fully-paid
| model, but I'd love to know what you think about the potential
| for a "freemium" model, eg with payment protection or improved
| anti fraud built in. My sense is that combating fraud/abuse
| costs money and currently UPI essentially relies on the
| customer not making mistakes, and if they do get defrauded they
| have to work the Indian justice system to get their money back
| -- not easy at the best of times.
|
| Also about this
|
| > Banks earn 50x to 100x more than the cost of UPI/payments in
| just float income
|
| A bunch of banks complained about loss of float income with
| RTGS & IMPS, is there any information about how they see UPI
| (which is built on IMPS?) affecting float? (I get that they
| have a lot of float income, but many Indian banks appear to be
| very inefficient and that float money is probably being used
| elsewhere already.)
|
| Finally, internet shutdowns -- today apparently a huge chunk of
| transactions are cash-based in India. But UPI's clearly growing
| fast -- and as it grows further, will the Indian government's
| propensity to kill mobile data at the slightest sign of trouble
| affect people's perception of UPI, by making it seems less
| reliable than cash? Or is there hope India will revisit
| internet shutdowns?
|
| Thank you!
| deepakshenoy wrote:
| A freemium service can already be built with a payment escrow
| for anti fraud protection, for willing merchants and
| customers. Fighting fraud is useful for banks to invest
| regardless of whether it's UPI or not, I'm not sure if you
| need separate models for UPI. Request abuse is pretty easy to
| track i imagine, for any bank or even for npci...and npci has
| a big profit pool.
|
| Indeed internet shutdowns are a problem but i think the state
| will have to move out of shutdowns as UPI gets popular. You
| are right, that is a pain.
| akritrime wrote:
| In before someone recommends building UPI on the blockchain
| and having region specific rollups to settle transactions
| offchain, that also uses a bluetooth mesh network to
| communicate with all nodes.
|
| (just a joke, this won't work due to limitations of data
| storage and blockspace, without even going into the can of
| worms that is governments interacting with a "independent"
| blockchain)
| salawat wrote:
| >Indeed internet shutdowns are a problem but i think the
| state will have to move out of shutdowns as UPI gets
| popular. You are right, that is a pain.
|
| They will not. They will double down. They will develop
| tooling to shut down just the people they need to to
| cripple any movement, and if you don't think they will,
| just look at the U.S.
| potamic wrote:
| Payments ultimately keep the economy running, and it's in the
| government's best interests to make sure there is as little
| friction as possible here. But I'm not sure it should be free.
| Because there is always a cost to things. If UPI is "free" then
| it is being funded by the taxpayers. The problem with that is,
| it's not very equitable distribution of cost. People who use
| payments less, are funding it on behalf of people who use them
| a lot, who ironically are able to contribute more tax. A usage
| based fee is essentially a service tax which many would argue
| is a fairer form of taxation than fixed tax.
| spaceman_2020 wrote:
| I don't see why we can't move to tiered pricing. X number of
| transactions are free. Transactions above that count attract a
| small fee.
| sudhirj wrote:
| A lakh is 100,000 and a crore is 10 million, or 10,000,000.
|
| In India, the next order of magnitude after 10,000 is one lakh
| (hundred thousand) and a crore is a hundred lakhs (100 x 100,000
| or 10M).
| ignoramous wrote:
| The context is _UPI ... has reached volumes of 10 lakh crore
| rupees per month_
|
| 1,000,000 * 10,000,000 => 1E13/mo rupees => $125,000,000,000/mo
|
| Google, Facebook, Amazon, Walmart are all shareholders in the
| parent company that _runs_ UPI along with some 19 other Indian
| banks.
| MAMAMassakali wrote:
| UPI is owned by NPCI(National Payments Corporation of India)
| which in turn is owned 67 share holders. Top 10 share holders
| are major banks and they hold around 80% shares. Other owners
| are smaller banks, other non banking financial institutions
| and Google(GooglePay), Amazon(AmazonPay),
| Flipkart/Walmart(PhonePe) etc.
| naruvimama wrote:
| e3bc54b2 wrote:
| Good god this is a great article!
|
| Starting from TLDR at top, it is well reasoned, well sourced and
| very detailed.
|
| And I agree, UPI should remain free, precisely to allow the
| vibrant ecosystem and innovation formed around it. Banks nowhere
| are known to be nice guys, even TFA gives multiple examples when
| they were dicks until forced down, and its no good idea why they
| should get paid for UPI transactions when they are already
| turning out profit from it.
| osrec wrote:
| For anyone looking to get a better handle on the numbers, INR 10
| cr is approximately GBP 1 million.
| yumraj wrote:
| the blog says: _10 lakh crore rupees per month_ not _INR 10 cr_
|
| 10 lakh crore rupees per month = INR 10,000,000,000,000
|
| which at the current rate of ~INR 79 to $1 comes to
|
| $126,582,278,481.00 per month
|
| as in $4,219,409,282.00 (over $4 Billion) per day
| spaceman_2020 wrote:
| UPI is amazing. And its quickly spreading everywhere.
|
| I was on a week long vacation in Goa and literally did not have
| to use cash even once. Right from local stores to restaurants to
| kayak rentals, everyone accepts UPI.
|
| Not a single transaction failed. Not a single transaction lagged.
| mandis wrote:
| Is UPI one of the rare times when a government organization has
| created an innovative technology that works for a scale of 100
| Million+ users?
| wtmt wrote:
| NPCI, the organization operating UPI, is owned by public and
| private banks. It is approved by the Reserve Bank of India
| (RBI) and is marketed by the government. About two years ago,
| RBI had concerns about NPCI having a monopoly and wanted more
| players to create and interoperate similar services, but it
| canceled that plan (reasons unknown).
| sg47 wrote:
| That too without a middleman to skim off the top.
| hackpert wrote:
| UPI's penetration in (urban and semi-urban anyway) India is
| honestly incredible. I worked with/on the tech when it was very
| nascent in 2016 and in 2022, on visiting India after a long time
| I was stunned to see _everyone_ has a little PayTM QR code card.
| Vegetable vendors, taxi drivers, roadside hawkers, small business
| owners. It's brilliant because the system is banking the
| traditionally unbanked, and generating tremendous amounts of data
| that can hopefully be put to good use by economists, honestly
| unlike any other system in the world. Even MPesa in Africa has
| stupidly high withdrawal and transaction fees, which UPI doesn't
| need at all.
| MichaelZuo wrote:
| Cmd+F to find 'liability' and the word only appears once in the
| very bottom disclaimer explaining that the author does not accept
| 'liability' for anything written.
|
| I guess the topic of who has liability for this financial system,
| and the cost of that liability, is too unimportant to be worth
| mentioning?
|
| e.g. In case of a breach of personal information, transaction
| records, etc., who would be held responsible?
| pdrojack wrote:
| The Bank where you account is.
| 2Gkashmiri wrote:
| absolutely. i am a professional who deals with businesses and i
| have seen how UPI has immensely helped reduce dependency on
| cash...
|
| i use it everyday. right now UPI is mandated to be mobile phone
| based, it has to keep the registered SIM card at all times, you
| cannot change your phone, cannot have a single account on muliple
| places, you dont have account portability but those are all
| technical issues.
|
| Because of an actual recession, the government is finding new
| ways of collecting taxes, recently they put GST or a tax on paid
| public toilets. So, everytime you pay to use a paid toilet, you
| are giving 18% tax on that transaction. That is the level of "tax
| hounding" the government has resorted to.
|
| i fully agree with the author here, i would even suggest, all the
| private players like google pay/phone pe who have their own apps
| built on top of UPI network should be made to pay-to-play because
| they are definitely earning because of cross-
| selling/upselling/advertising.
|
| google/amazon wants to float a new UPI app, heck even trucaller
| has one so why should they not have an interest free bank deposit
| to pay for the infrastructure. they would continue to earn by up
| selling etc anyways and the network would continue to get funds
| to run.
| bergenty wrote:
| What happens if you lose your phone? There must be some way to
| transfer the account right?
| wtmt wrote:
| UPI is not a money holding account by itself. It's an
| identifier for your bank account. You can have multiple
| identifiers for the same bank account (like email aliases
| pointing to one mailbox).
|
| UPI is primarily available on smartphones through an app. The
| setup process involves the UPI app (could be bank's app or a
| third party app like Google Pay) sending an SMS with a
| specific code to NPCI (the private consortium operating the
| UPI service).
|
| If you lose your device or uninstall the app or the UPI
| account is deactivated due to inactivity, you just fire up
| the app and get it to send the SMS again for authorization.
| bergenty wrote:
| How do you validate yourself as the owner of the bank
| account especially if that validation happens over SMS? Is
| there a password or pin that is secret?
|
| Or do you have to go to the bank website and initiate an
| SMS send to your new phone? How are very rural people able
| to navigate all that complexity given how prevalent UPI is
| at this point?
| nmzaheer wrote:
| It a two factor authentication system.
|
| One is your mobile number i.e. the UPI app first verifies
| whether the number belongs to you and it is being sent
| from the same device. To do that, it auto sends a encoded
| SMS to the NPCI server and awaits a response on the same
| device (no provision to manually enter the response. It
| has to be auto read by the app). This ensures that nobody
| else can claim ownership of that mobile number.
|
| Having known that you own the number, it allows you to
| link your bank account to the UPI ID. This mechanism
| involves again sending a SMS to the bank server to verify
| whether an account exists that is linked to the mobile
| number you just proved that you possess. If that is true,
| then you need to prove that you own the bank account.
| This is done by asking you to enter your debit card
| details along with the ATM PIN. If that is successful,
| then that bank account is linked to the UPI ID you just
| created. Further, the app now forces you to set a UPI PIN
| that can/is different from your ATM PIN. Now you can
| perform UPI transactions with your UPI PIN.
| 2Gkashmiri wrote:
| its like this.
|
| your bank account has a phone number linked to it. in
| normal cases here is the workflow.
|
| you install UPI. UPI app sends sms verfiying your mobile.
| app lists all banks. you select your "bank". you set pin.
| done.
| 2Gkashmiri wrote:
| even illiterate people are able to navigate a cell phone.
| take for example infants or 1-2 yo kids. they cant read,
| cant speak but they can open youtube and even reach their
| favorite video.
| 2Gkashmiri wrote:
| nah, its not like that.
|
| your "upi address", like "abc@sbi" is tied to that phone/sim
| card/bank.
|
| if you change your phone or use a different app, that
| "handle" is reserved and not portable.
|
| if you change your phone or lost it, just get a duplicate sim
| card, install a UPI app and get a new address.
| phanimahesh wrote:
| The handle is tied not to the device but to the mobile
| number. If you change your device you reregister on the new
| device and can continue to use the same handles.
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