4 ms·

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 i

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 4y ago
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 4y ago
  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.
  - salawat 4y ago
    >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.
  - akritrime 4y ago
    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)
spaceman_2020 4y ago
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.
- deepakshenoy 4y ago
  Small merchants will ditch UPI Tiered just doesn't help if you want to encourage growth...it caps growth. Only very few large merchants will pay who already pay for debit or credit cards. Many of them pay for UPI anyhow as gateways charge a platform fee. Banks are paid by float for all payments including neft, cheques and cash atm, all of which are free for small amounts and UPI is defined as a small amount. When float income stops then it makes sense to think of charging for upi.
  - spaceman_2020 4y ago
    Didn't realize you actually had an account here - long time reader Mr. Shenoy.
    - deepakshenoy 4y ago
      Cheers
potamic 4y ago
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.
- unmole 4y ago
  UPI is supposed to replace cash. Cash is free.
  - 6510 4y ago
    This is so obvious I keep want to say it in topics like this: What have we gained with all this automation if clowns decide % fees are reasonable. Before you know it large players capture the market and we are stuck with ever growing fees. What percentage of startups are trying to improve something vs hoping to capture a market? How do you even tell the difference at this point? Things are so silly that numbers cost money now. Many imagined the dystopian future where people are numbers but few could picture it this dark... You would think you got your own number and are stuck with it. In stead you merely get to rent a number and if you cant pay the rent the system is to troll you hard for god knows how long. How is this superior to cash?
- deepakshenoy 4y ago
  Banking payments are never useful to charge progressively. Always, one part of the banking system subsidises the other, so some players will pay for others, some borrowers will pay higher for others to get lower rates etc. Banking is not a bunch of silos, it's fungible, interconnected, dependant activities. Usage based fees are not good; you want people to transact more so you can earn more float income on average rather than nickle and dime out fees from a few and this reduce growth. The float income pays for everything and much much more, so no point doing usage based fees

signal11 4y ago

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 4y ago
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.
- salawat 4y ago
  >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.
- akritrime 4y ago
  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)

spaceman_2020 4y ago

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.

deepakshenoy 4y ago
Small merchants will ditch UPI Tiered just doesn't help if you want to encourage growth...it caps growth. Only very few large merchants will pay who already pay for debit or credit cards. Many of them pay for UPI anyhow as gateways charge a platform fee. Banks are paid by float for all payments including neft, cheques and cash atm, all of which are free for small amounts and UPI is defined as a small amount. When float income stops then it makes sense to think of charging for upi.
- spaceman_2020 4y ago
  Didn't realize you actually had an account here - long time reader Mr. Shenoy.
  - deepakshenoy 4y ago
    Cheers

potamic 4y ago

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.

unmole 4y ago
UPI is supposed to replace cash. Cash is free.
- 6510 4y ago
  This is so obvious I keep want to say it in topics like this: What have we gained with all this automation if clowns decide % fees are reasonable. Before you know it large players capture the market and we are stuck with ever growing fees. What percentage of startups are trying to improve something vs hoping to capture a market? How do you even tell the difference at this point? Things are so silly that numbers cost money now. Many imagined the dystopian future where people are numbers but few could picture it this dark... You would think you got your own number and are stuck with it. In stead you merely get to rent a number and if you cant pay the rent the system is to troll you hard for god knows how long. How is this superior to cash?
deepakshenoy 4y ago
Banking payments are never useful to charge progressively. Always, one part of the banking system subsidises the other, so some players will pay for others, some borrowers will pay higher for others to get lower rates etc. Banking is not a bunch of silos, it's fungible, interconnected, dependant activities. Usage based fees are not good; you want people to transact more so you can earn more float income on average rather than nickle and dime out fees from a few and this reduce growth. The float income pays for everything and much much more, so no point doing usage based fees