India is forced to subsidize farmers to the tune of $37B JUST for urea. Governments routinely offer free bus services to women, free cash handouts to women, free electricity to farmers (who then use the power to pump out groundwater and grow paddy in areas otherwise not suitable for it). The list goes on.
A $1B subsidy to eliminate friction on the payment front is peanuts.
>India is forced to subsidize farmers to the tune of $37B JUST for urea. Governments routinely offer free bus services to women, free cash handouts to women, free electricity to farmers (who then use the power to pump out groundwater and grow paddy in areas otherwise not suitable for it). The list goes on.
>A $1B subsidy to eliminate friction on the payment front is peanuts.
These are entirely independent issues.
Should India subsidize farmers like this? IDK, maybe
Should India charge fees on UPI payments? IDK, maybe
One of the reasons why the fee is being considered is under the pressure of other payment providers who are loosing to UPI in Indian market. Its been believed to be one of the negotiation points by the US-India trade deals
I won't be surprised. In Australia, no public transport system accepts the national payment system (EFTPOS) and instead it is either a public transport specific card or one of the 3 American rails. In NSW, there was promise of a second phase to support EFTPOS but that is hasn't happened yet.
Same reason the US is going after Pix in Brazil. The world is decoupling from the US and the US is going to try to flex against it as it continues. Dollar dominance and the “exorbitant privilege” continue to erode (with the acceleration self inflicted). Also shrinks the TAM of these private US firms to only the US versus the world.
It goes both ways: What if the ONLY payment method was the one approved by your "elected" government. A balance where they can all exist is the best, and most difficult decision.
Currency is already managed by the elected government, and every democracy in the world traces electronic transactions. Some (like Italy) forbid cash payments in large sums altogether. So what's the boogieman here?
Currency is a barriers bond that affords a degree of decentralisation-in-operation and use that isn't afforded by digital payments, even crypto for practical purposes.
The Italian government has no power over foreign cards, and will be careful to not hinder those transactions lest they want to lose their tourism income.
The boogyman is just what you described, and every democracy in the world absolutely does not trace electronic transactions.
Some have a more hands off approach, including size of transactions and flagged behaviour as indicators of when payment processors must report to the government.
The Goverment should absolutely have no idea who spends what, where. Warrants and court orders, check values should be required before anyone can know. The potential to suppress political opponents, to squelch legitimate protest, to interfere with elections, is too dangerous.
Simply because some countries, like the US after 9/11, decided to give up this aspect of a free people, does not make it right.
Yes, and this is a bad thing, and free societies are impossible without the possibility of payments that the government doesn’t want you to be able to make.
Cryptocurrency solves that problem well, which is why governments have moved hard to effectively nerf it everywhere.
> What if the ONLY payment method was the one approved by your "elected" government.
Yeah, what if?
You didn't provide any argument, didn't point to any real problem. You just hinted at a "terrible bad thing". Would we have monsters under our beds or bad guys in corners to ambush us?
This sounds like VISA/Mastercad/Apple Pay playing FUD[1].
You realize you're arguing for a monopoly, right? One where competition is not only non-existent but also illegal, and which has complete control over how you're allowed to spend your money.
I think arguing "but it's a democratic monopoly" is little comfort in this situation. Maybe you trust your government not to ever be incompetent or to use the powers granted by this monopoly in a way you disapprove of. Maybe in the short term you'd even be right to do so. But I think history has proven that over the long term that's a very foolish assumption to make.
Which is completely irrelevant because as the government of the country they have the power to make laws, now and in the future which compel private entities to perform actions like AML (anti money laundering) and KYC (know your customers).
The end result is private entities taking money out of the system at some stage, and it doesn't shield you in any way from government incompetence or malice.
You go far enough on fiscal tracking and you just wind up back where we've always been: barter. All currency is as useful as the regime backing it, and when that regime falls, barter always comes back in. Everything else is just rent seeking scaffolding to reduce barter friction (cash let's me store all the value I've created, but so could gold bars, or bitcoin, or vodka).
This is to say: All currency is about control and convenience (you trade "invisible transaction" for "easily able to resolve payment") because those in power want to know/control the money and everyone else wants convenience.
> You realize you're arguing for a monopoly, right?
Right! Like all the other monopolies that governments already have: public security (police and courts of law), external security (armed forces), public healthcare in many civilized countries, inspection of health regulations and consumer safety, monetary policy, etc.
> you trust your government not to ever be incompetent
Oh, I don't. But Apple, Visa, Mastercard and Google Pay aren't very "competent" either.
> history has proven that over the long term
History has proven that privatization of many of government monopolies are disastrous: Roman generals making private armies and destroying the Republic, abuse of forced labor from inmates in private prisons, exorbitant fees from payment providers (Visa, Mastercard), food dangerous for public consumption because the governments didn't inspect them, etc.
> But Apple, Visa, Mastercard and Google Pay aren't very "competent" either.
The article doesn't say and I know nothing about India. I could guess consumers are oaying using their smartphones. So Google/Apple duopoly are still the gatekeepers to use UPI making huge profits. Of course using one of the American backends would make their control and profits orders of magnitudes bigger.
Fixed it for you. You had left some extraneous quotation marks there.
Either way, while governments should not get free pass and should be scrutinized by its citizens, we definitely should not allow corporations with ties to hostile governments (such as the case of Visa and Mastercard) any oversight of payment infrastructure.
Payment rails are a natural monopoly so yeah I’m good with the gov owning it and as the article says, everyone is free to compete with the services they offer.
The interesting thing is that Visa's payment rails are cheaper than Pix. Pix charges businesses 0.22% to 0.33% while the Visa network rate is only 0.10% to 0.15% per transaction.
The main thing that makes card transactions more expensive is the merchant bank assuming chargeback risk, but that's because card payments are an entirely different transaction type. Pix is digital cash. You typically cannot get refunded for any reason. Cards are not digital cash. You can get refunded for fraud and unauthorized transactions.
> The interesting thing is that Visa's payment rails are cheaper than Pix. Pix charges businesses 0.22% to 0.33% while the Visa network rate is only 0.10% to 0.15% per transaction.
This is not factually accurate. Pix also has fraud controls built into the platform, and does fine doing far more volume than credit card rails in Brazil. It is an objective success, having avoided US financial service firms from skimming hundreds of basis points of total economic activity out of the Brazilian economy.
Brazil's Pix ‘much cheaper' than card payments, paper by central bank economists shows - https://www.reuters.com/article/business/brazils-pix-much-ch... - March 23rd, 2022 ("Brazil’s Pix retail instant payment system is “much cheaper” than card payments for merchants, according to a paper published Wednesday by the umbrella body of the world’s central banks, highlighting its growth potential for businesses after its vertiginous rise among individuals. The paper, which was co-authored by economists at the Brazilian central bank for the Bank of International Settlements (BIS), says Pix costs an average of 0.22% of a transaction’s value for merchants, whereas debit cards cost slightly above 1% and credit cards reach 2.2% in Brazil.")
> In this paper, we employ an instrument and individual-level banking data in Brazil to
examine the effects of a novel payment technology, Pix, on the use of other payment
technologies and its impact on the banking sector. We find evidence that Pix increases
use of the four most common payment technologies in Brazil among individuals and
firms. Furthermore, our empirical evidence suggests that Pix contributes to an
increase in the number of bank accounts, their use and access to credit, benefiting
different types of banks. The findings indicate that the implementation of new
payment technologies yields advantages not only for firms and individuals but also
for the broader banking and payment industry.
I don't think adding a 0.5% surcharge to transactions over Rupees 2000 is "pound foolish". Most transactions are smaller, and someone has to pay to maintain the infrastructure. :shrug:
Also: just because money is being wasted on cause $X does not mean that there's more of it lying around to be wasted on cause $Y! You've got to draw the line somewhere!
> someone has to pay to maintain the infrastructure. :shrug:
Under Indian law, companies must spend 2pc of their net profit on CSR activities (corporate social responsibility). Ask banks to use that money. The Indian banking sector made a combined profit of $40B this year. 2pc of that is $800M. Close to the $1B number.
> You've got to draw the line somewhere!
Draw it in the farm sector! They do not have to pay income tax on their income, get subsidies on fertilizers, free electricity, guaranteed prices for their crops. Small farmers cannot take advantage due to average holding size, and large farmers laugh all the way to the bank!
India is a conservative society. Women are 50% of the vote bank. They actually vote in larger numbers compared to men in many constituencies. They manage households and are very quick to notice price increases etc. The free bus rides and cash handouts are basically a transparent attempt to buy their vote. It is what it is.
I really hope cash transactions become a little more normalised in India.
The UPI experience is built for a single audience in mind. It has changed the way people transact in India but at the same time it's been an absolute nightmare for a tourist to play along. The only route for a tourist to use UPI is via third party apps, which charge a markup for loading money (3%). But let's say you accept that as a part of travelling - the limitation of tourist wallets is that they can't be utilised for P2P payments - exactly what UPI is most used for across the country.
Alternative, since no one accepts cash anymore, is that I have to carry thick wads of cash so I can hand out exact change. That still gets you the stink eye because most vendors don't like to deal with cash anymore.
> the limitation of tourist wallets is that they can't be utilised for P2P payments - exactly what UPI is most used for across the country
Same issue in a lot of Southeast Asia. After jumping through all hoops to get the correct app, id verified and paying a hefty fee, it was still a gamble if the restaurants would have a business QR code or a personal one.
One time in Laos I was on an island that didn't have an ATM, almost no cards were accepted and I had run out of local currency. So I ended up asking for the QR code before ordering at the restaurant to make sure it would work out.
In India it's super annoying when taking autos because the drivers won't have change and in 99% of the cases they have a personal code. So I just ended up using Uber with credit card, much less hassle.
I don't know, central banks seem super afraid of money laundering somehow. But just allow me to spend $100 or what, I just want to buy a quick coffee or a fruit from a street vendor, not a Rolex.
So a country of a billion+ people should reverse its very successful digitization efforts because a handful of tourists can’t be bothered to pay a small surcharge?
Smaller, in fact, than what they pay in their own country for credit card fees.
>The UPI experience is built for a single audience in mind. It has changed the way people transact in India but at the same time it's been an absolute nightmare for a tourist to play along.
Indian built UPI for a single audience AKA their citizens
This issue isn't the surcharge but there are still limitations to it. The commercial banks really need to do something like this themselves.
Well they do, but last time I looked you needed to physically go to a branch, but not all branches do it - yeah I'm not going to spend half a day on my trip just to pay slightly easier. It needs to be something you can sign up in the airport in 10 minutes for.
Every time I've been to India I just ended up finding an ATM (that works with my card) and carrying around massive wads of cash. I even stayed at a hotel once that couldn't take international cards.
If you're worried about the markup for loading your digital wallet, what is the markup for any tourist trying to get cash from eg. Thomas Cook? I doubt any tourist could get currency at a significantly cheaper rate.
Some P2P is between family/friends. Or you are paying rent etc. But a lot of it is business transactions that move funds from one savings account to another because the auto driver is accepting a payment in his mother's or wife's account or something similar. There is so much friction in the banking system if you have to create a current account that this is pretty common.
The system needs to improve drastically to support the two sides instead of letting it be. Should help your use case as well if that happens
Is this a common experience now? I haven’t been there in a while, but one used to be able to use credit cards at bigger establishments and smaller vendors used to accept cash even if UPI was advertised in their shop. Rarely was anyone mad that you didn’t use UPI.
> it's been an absolute nightmare for a tourist to play along.
But the solution to this should be to simplify the tourist experience and to allow payments from foreign banks and cards. Traveling to China has a huge hassle in the late 2010s due to everyone local switching to WeChat/Alipay but it not being available for tourists, but in the last few years (I last visited in 2023), you could use WeChat/Alipay with a non-China bank card.
I mean this sounds like an edgecase, which is good tradeoff for the ~billion of people who this system is designed for.
Essentially UPI was there to stop the industrial fraud and money laundering that was going on india. I have not actually checked the efficacy of this though. The last time I checked was when modi made the largest bank note not legal tender.
That part aside it does sounds like VAT (a 20% sales tax on all purchases) but for transactions.
> it's been an absolute nightmare for a tourist to play along. The only route for a tourist to use UPI is via third party apps
An NRI account with PhonePe is good enough as someone with OCI, but even in my ancestral town and village Visa and AmEx adoption by payment processors has been high despite no real diaspora or tourism.
And there's no real point in optimizing for the kind of tourist who's going to go visit a slum like Paharganj or go to Kasol to partake in drugs.
That said, I guess it also depends on where an NRI or PIO is from as some states have better payment processor penetration than others.
But tbf, when my SO and I go to VN to visit family, it's the same story there (Momo/Zalo and cash rule Vietnam outside the tourist bubble of D1/D3/Thao Dien/Da Lat/Da Nang/Hanoi and we resort to her Vietcombank account).
Not being able to pay for things is a pretty fundamental problem even for a business traveler to Bangalore.
Last time I bit the bullet and set up Mony, which at least got me access to UPI, but it's limited mostly by government policy: you can't complete the KYC process until you've physically landed in India, can't transfer to personal accounts, fees on adding money, fees on keeping money (they charge "unused balance" fees!), etc.
> Not being able to pay for things is a pretty fundamental problem even for a business traveler to Bangalore
In what situation were you as a foreign traveler where you needed to pay UPI?
Convenience stores and hypermarts like Reliance SMART/Digital and DMart or QuickCommerce platforms like Blinkit accept Visa and AmEx credit cards. Transit via Uber, Ola, and co accept Visa and AmEx credit cards. And most restaurants and bars targeted at outsiders accept Visa and AmEx credit cards. And Hotels accept Visa and AmEx credit cards or can be booked via platforms that accept them like AirBnB.
So transit, residence, restaurants, and convenience stores (all of which will be reimbursed by your employer) are all doable via credit card.
Fundamentally, UPI was built for India3, as were other peers across Asia, not foreigners.
But my SO and I never understood the tay ba lo mindset. Catering to them is what kept Thailand and the Dominican Republic stuck in tourism-induced Dutch disease because it incentivizes extractive and low productivity economic sectors like real estate and low skill services at the expense of human capital development and investing in high productivity industries.
> In what situation were you as a foreign traveler where you needed to pay UPI?
All the time? Credit cards are only accepted by fancy places and cash is increasingly a hassle, especially in a tech-forward place like BLR.
The final straw was when I bought some biryani at a shopping mall food court and tried to pay cash. They had no change, the neighboring stalls had no change, and this wasn't some plot to extract money from the gora, they genuinely didn't have and couldn't find small bills.
In the end they tried to wave it off and discount my meal by 40 rupees or something, and I rounded up by 60 instead. And I remember thinking I probably just created another problem, because now they need to balance the books and parcel out the cash tip without change.
> In what situation were you as a foreign traveler where you needed to pay UPI?
If you live in a tiny bubble and only take an Uber to the Work Campus, Uber to the small number of marts you've found that accept card, Uber to the small number of restaurants that accept card... you have to find them first of course.
Want to buy some cigarettes while you take a stroll in the evening? Good luck. Want a tuktuk to take you a mile across the beautifully walkable road infrastructure? Good luck. Want to get lunch with friends? Good luck.
90% of life doesn't exist inside the corpo "work hotel sleep" bubble, I described it to somebody as akin to trying to pay with bank transfer in the UK, technically you can do it... the manager will come out and spend 20 mins futzing, taxi drivers may be able to do it if you ask nicely, your shopping options will be very limited and far between because you're trying to transact in the non-predominant medium.
Yes, loads of places accept card, larger stores accept card, want coffee? Blue Tokai accepts card. Want Blinkit or Zomato? You need an Indian number first. Want a Hotel? Booking.com is predominantly "pay at the hotel" across most of India, which means it's a dice roll as to whether they'll accept card. You'd be surprised at how many hotels completely forget that not all customers are Indian+Aadhaar+UPI, except by the time you've got there and realized they accept neither C-form nor Card despite telling you explicitly they do - you've already spent the time, money and effort getting there only to find out that no... it's not practical in reality for you to book a hotel and pay for whatever reason. Repeat ad-nauseum everywhere daily
> Want to buy some cigarettes while you take a stroll in the evening
Why would you go buy a beedi from the local paan-wala?
> Want a tuktuk to take you a mile across the beautifully walkable road infrastructure
Why would you call an auto or e-rickshaw when you could call and pay for via Uber (which also does autorickshaw pairing)
> 90% of life doesn't exist inside the corpo "work hotel sleep" bubble
OP was talking about "business travel".
> You'd be surprised at how many hotels completely forget that not all customers are Indian+Aadhaar+UPI
They aren't forgetting. They just don't care about a foreign traveler. It's the same when I travelled to China outside of the foreigner bubble on multiple occasions
----
At the end of the day, foreigner who can afford India1 but is consuming like India3 is a waste. Doesn't matter if it's a backpacker or a kanjusi NRI.
Why would you go for a masala dosa with filter kaapi with your colleagues when you could order a hamburger from room service? Why would you hail an auto when you could just charter a helicopter instead?
Isn't 0.5% very competitive and basically nothing compared to taxes on the transaction?
Here in Poland we have a budding "save cash" movement. And they make some good points about freedom and privacy but are the loudest about the processing fees when mostly it's a way for smaller merchants to avoid paying taxes. Which is fine, I think they should be exempted anyway, but let's not pretend that it's the 0.5% in fees rather than the 30% in taxes.
People want every government service to run at a deficit and maximize the amount of pain inflicted to billionaires. They don't even need them to balance - they're just both good.
The difference is that 0.5% on the whole payment, might in some cases be actually much more than taxes on the profit.
Or even worse, if you sell for whatever reason without profit, the tansaction fee is your loss.
I would like to know where that 1% retail business is located. My family has a bunch of hardware/electricity retail businesses and the margins are way more than that. Like 30%-500%.
In Poland fees are capped at 0.3% for credit card, 0.2% for debit per EU. Which is why generally in the EU you don't have the insanity with credit card loyalty programs.
Only the interchange is capped. The merchant has to also cover network and processor fees. And then there are some uncapped transaction supposedly so the fee covers this risk. Comes out to 0.6-0.7% for a smaller merchant with the card present.
UPI payment has enabled tracking actual sales data and helped with tax collection. This is an intangible benefit which is likely to go away with the introduction of the fee.
Right, this has second and third order effects. I am sure this must have been brought up during the discussions and overruled for whatever reason. The bureaucrats and politicos involved are not stupid. But there is some game being played here.
0.3-0.5% is still nowhere near the rates of visa and mastercard. Does UPI offer the same level of fraud protections or is it a free for all like Zelle is here in the states? Especially if they limit to > 2000 rupees.
Hopefully they allow foreigners some track to access UPI in the future.
...That may be about to change...
...The government has yet to decide the rate or exactly where it will apply...
...One option reportedly under discussion would target transactions above 2,000 rupees at larger merchants, leaving small businesses and low-value payments untouched. Transactions above that threshold account for only about 4% of merchant-payment volumes but roughly 67% of their value, according to brokerage firm Jefferies....
So discussions are at an early stage and an excited journalist has made a international article out of a national one. It's up to Indians to make clear what they are willing to tolerate in this consultation phase.
> the system is now available in some form for payments in 11 countries outside India.
I see this often cited, but in reality it's a farce. "UPI is international" the staunch defender says, so I rebut "Yes, in one place at the Eiffel Tower... everywhere else? The French have no idea what UPI is, and your bank will charge you stupid FX fees for card payments".
Meanwhile if I'm in India, people look at me weirdly for paying with UPI yet most won't take card payments outside of tourist areas or it will get declined because foreign cards are blocked - and if you try to pay cash suddenly nobody has any change, will refuse to take the 20 rupee note they gave you yesterday, or have concerns about whether the notes you literally just withdrew from an ATM are legitimate - meaning you can end up with notes that are defacto unspendable despite being perfectly legal tender and in acceptable condition.
And as a tourist... you want UPI? There are a few ways but they're byzantine, apps locked to the Indian App Store (for tourists?), in-person KYC upon landing, very low first-payment limit, topup/signup and idle fees that push the net fee % easily into the 5-10% range.
Lets look at a perfect example... you pre-KYC on an app ahead of your trip on the one app that allows remote KYC, but you can't load money onto - first you must provide your visa, but the eVisa doesn't count they want the actual visa stamped in your passport. You land, immediately after customs you submit the picture of your visa stamp and wait an indeterminate amount of time, it could be 8 hours, or 24 or 48 or it could get rejected and you could be required to do in-person KYC (either you go to them, or they come to you within a ~5hr window... but only in the major cities).
So day 1 it's impossible to use UPI. It gets approved on day 2, you take a taxi somewhere maybe a nice restaurant, your UPI is now loaded with INR and you try to pay the driver... Your driver has a personal UPI account, you can't pay him! You only have cash... Large denomination INR notes because that's what the ATM provides, he doesn't take card and refused to admit he has change. You eat the already inflated cost and swear to only use app-based services (assuming the Taxi Mafia hasn't had them banned in your city).
You get to the resto and enjoy a meal with your friends, it's a nice place and somewhat expensive, you come to pay, the bill is reasonable and you think "I will pay with UPI", you try paying, it's a business account so should be OK! NO.... You have exceeded your first-day limit! Waiter tells you there is no card machine, and they have no change for cash...
Eventually you leave India, there's a non-trivial amount left in your tourist UPI account, you look for somewhere to withdraw it back to your card - no physical counters open at the airport, you request a withdrawal via the app... it never comes, the next month you get hit with a 500 INR inactivity fee, your visa expires and the app shuts down, next month 500 INR inactivity fee - can't make support requests through the app any more because your visa is no longer valid... Your balance slowly goes to 0 because you didn't think to spend every last rupee on your way out so it gets eaten by the system.
I say a small sub-1% fee on UPI is fine, it's great infrastructure when it works, but more needs to be done with global UPI integration. I have QR enabled payments available across maybe 10 different countries and India sticks out as being the one that's consistently an absolute pain and actively works against you.
Unfortunately Moreta disabled Thai PromptPay QR payments recently except for US KYC'd people due to some compliance dispute. There's also lbank.com but I can't confirm if they currently work in Thailand (lbank has an... interesting reputation, I can only use it via TestFlight, but works for my daily food spend needs)
Otherwise you're stuck with AliPay+ merchants (easy via Wise) or TAGTHAi which should still work but is expensive and sucks.
--
I forgot about https://p2p.me - they're taking the regulatory arbitrage 'personal travel payment concierge service' approach, basically "work around the problem, not with it" as the founders realized the people making the regulations neither know nor care about on-the-ground practicalities.
Yesterday an article on tipping hit HN and this reminds me of it. When you remove barriers people spend freely. Start throwing stupid pause moments, the value doesn't match the advertised price because of x fee, y tax, z undisclosed service or an outright wall screen begging for a tip, and people slow down their purchasing. It will be interesting to see an impact here if this goes through and it could be instructive to the value prop that tips bring to industry. You may think you are externalizing a cost but maybe you are really harming sales.
Ever since someone brought up this system a while ago and confused it with a Real-Time Gross Settlement (RTGS) system https://news.ycombinator.com/item?id=48875605 , it has been bothering me that seemingly no one is talking about the real long-term cost of this "free system."
The history of payment systems is a history of risk. A quick primer,
All large-scale payment systems that interface with banks must have an answer for the inherent conflict between what the bank does (i.e. provide debt) and how it does it (by taking savings).
If the purpose of banks is to take capital from customers and use it to provide debt to others, then how much money should they keep for their customers' withdrawals and transfers?
If you do constant transfers back-and-forth 24x7 multiple times a second, then banks need a lot of capital at hand to manage the liability.
So even though gross settlement is supposed to be real-time, most RTGSes allow banks to borrow from their government's central bank via an "intra-day credit" system and then effectively net / settle at the end of the day, https://www.newyorkfed.org/research/epr/08v14n2/exesummary/e...
This loophole in a supposedly real-time system reduces the amount of money that banks "actually" owe each other. This allows banks to keep smaller reserves and provide greater amounts of capital to their customers.
But if you net only a few times a day, it creates risk. What if a bank becomes insolvent in between? Then it wouldn't be able to meet the obligations created by its customers, which would mean that other banks would fall short on their obligations and so on.
It's a network contagion effect; which is partly why the US Fed spent the better part of a decade studying counter-party risk in settlement systems before designing the latest version of its RTGS.
The Fed has protocols in place to stop such contagions before they start. Does the Indian government and its central bank? Where's the capital required going to come from? If a bank fails, who pays for its obligations? The Fed (currently) has a free infinite money glitch backed by the US Military, but the Indian government doesn't. So... where's that money going to come from?
Who is underwriting this system? Have they modelled systemic collapse? Because given what I've read about Indian banks and their bad debts, https://www.bbc.com/news/world-asia-india-58654740 it's a when not an if.
Pennywise, pound foolish decision.
India is forced to subsidize farmers to the tune of $37B JUST for urea. Governments routinely offer free bus services to women, free cash handouts to women, free electricity to farmers (who then use the power to pump out groundwater and grow paddy in areas otherwise not suitable for it). The list goes on.
A $1B subsidy to eliminate friction on the payment front is peanuts.
>India is forced to subsidize farmers to the tune of $37B JUST for urea. Governments routinely offer free bus services to women, free cash handouts to women, free electricity to farmers (who then use the power to pump out groundwater and grow paddy in areas otherwise not suitable for it). The list goes on.
>A $1B subsidy to eliminate friction on the payment front is peanuts.
These are entirely independent issues.
Should India subsidize farmers like this? IDK, maybe
Should India charge fees on UPI payments? IDK, maybe
One of the reasons why the fee is being considered is under the pressure of other payment providers who are loosing to UPI in Indian market. Its been believed to be one of the negotiation points by the US-India trade deals
I won't be surprised. In Australia, no public transport system accepts the national payment system (EFTPOS) and instead it is either a public transport specific card or one of the 3 American rails. In NSW, there was promise of a second phase to support EFTPOS but that is hasn't happened yet.
The American Empire is alive and well.
these mfs have no shame do they?
Same reason the US is going after Pix in Brazil. The world is decoupling from the US and the US is going to try to flex against it as it continues. Dollar dominance and the “exorbitant privilege” continue to erode (with the acceleration self inflicted). Also shrinks the TAM of these private US firms to only the US versus the world.
https://en.wikipedia.org/wiki/Exorbitant_privilege
https://news.ycombinator.com/item?id=48994782
https://news.ycombinator.com/item?id=48415854
Something like Pix is a great blueprint for the future imo.
I don’t want international private companies controlling payments, better have my own elected government manage it.
It goes both ways: What if the ONLY payment method was the one approved by your "elected" government. A balance where they can all exist is the best, and most difficult decision.
I'd have a very hard time spending other currencies than CAD to pay my bills.
Currency is already managed by the elected government, and every democracy in the world traces electronic transactions. Some (like Italy) forbid cash payments in large sums altogether. So what's the boogieman here?
Currency is a barriers bond that affords a degree of decentralisation-in-operation and use that isn't afforded by digital payments, even crypto for practical purposes.
The Italian government has no power over foreign cards, and will be careful to not hinder those transactions lest they want to lose their tourism income.
The boogyman is just what you described, and every democracy in the world absolutely does not trace electronic transactions.
Some have a more hands off approach, including size of transactions and flagged behaviour as indicators of when payment processors must report to the government.
The Goverment should absolutely have no idea who spends what, where. Warrants and court orders, check values should be required before anyone can know. The potential to suppress political opponents, to squelch legitimate protest, to interfere with elections, is too dangerous.
Simply because some countries, like the US after 9/11, decided to give up this aspect of a free people, does not make it right.
They do trace and log them, though.
They do not. They have to get a warrant to get such logs from a bank.
Yes, and this is a bad thing, and free societies are impossible without the possibility of payments that the government doesn’t want you to be able to make.
Cryptocurrency solves that problem well, which is why governments have moved hard to effectively nerf it everywhere.
> the possibility of payments that the government doesn’t want you to be able to make
The idea that visa and mastercard provide these ...
The government can already order VISA to not accept your payment and/or just make it too cost-prohibitive. Without any real recourse from your side.
Direct government services typically have a universal mandate. The government won't be able to stop doing business with you.
> What if the ONLY payment method was the one approved by your "elected" government.
Yeah, what if?
You didn't provide any argument, didn't point to any real problem. You just hinted at a "terrible bad thing". Would we have monsters under our beds or bad guys in corners to ambush us?
This sounds like VISA/Mastercad/Apple Pay playing FUD[1].
[1] https://en.wikipedia.org/wiki/Fear,_uncertainty,_and_doubt
You realize you're arguing for a monopoly, right? One where competition is not only non-existent but also illegal, and which has complete control over how you're allowed to spend your money.
I think arguing "but it's a democratic monopoly" is little comfort in this situation. Maybe you trust your government not to ever be incompetent or to use the powers granted by this monopoly in a way you disapprove of. Maybe in the short term you'd even be right to do so. But I think history has proven that over the long term that's a very foolish assumption to make.
Which is completely irrelevant because as the government of the country they have the power to make laws, now and in the future which compel private entities to perform actions like AML (anti money laundering) and KYC (know your customers).
The end result is private entities taking money out of the system at some stage, and it doesn't shield you in any way from government incompetence or malice.
In my country they have to make laws to FORCE shops and restaurants to accept cash. Because it is a damn hassle.
You go far enough on fiscal tracking and you just wind up back where we've always been: barter. All currency is as useful as the regime backing it, and when that regime falls, barter always comes back in. Everything else is just rent seeking scaffolding to reduce barter friction (cash let's me store all the value I've created, but so could gold bars, or bitcoin, or vodka).
This is to say: All currency is about control and convenience (you trade "invisible transaction" for "easily able to resolve payment") because those in power want to know/control the money and everyone else wants convenience.
> You realize you're arguing for a monopoly, right?
Right! Like all the other monopolies that governments already have: public security (police and courts of law), external security (armed forces), public healthcare in many civilized countries, inspection of health regulations and consumer safety, monetary policy, etc.
> you trust your government not to ever be incompetent
Oh, I don't. But Apple, Visa, Mastercard and Google Pay aren't very "competent" either.
> history has proven that over the long term
History has proven that privatization of many of government monopolies are disastrous: Roman generals making private armies and destroying the Republic, abuse of forced labor from inmates in private prisons, exorbitant fees from payment providers (Visa, Mastercard), food dangerous for public consumption because the governments didn't inspect them, etc.
> But Apple, Visa, Mastercard and Google Pay aren't very "competent" either.
The article doesn't say and I know nothing about India. I could guess consumers are oaying using their smartphones. So Google/Apple duopoly are still the gatekeepers to use UPI making huge profits. Of course using one of the American backends would make their control and profits orders of magnitudes bigger.
> approved by your elected government.
Fixed it for you. You had left some extraneous quotation marks there.
Either way, while governments should not get free pass and should be scrutinized by its citizens, we definitely should not allow corporations with ties to hostile governments (such as the case of Visa and Mastercard) any oversight of payment infrastructure.
Payment rails are a natural monopoly so yeah I’m good with the gov owning it and as the article says, everyone is free to compete with the services they offer.
I encourage you to loudly champion such a model in your nation state to whomever is in power and will listen.
The interesting thing is that Visa's payment rails are cheaper than Pix. Pix charges businesses 0.22% to 0.33% while the Visa network rate is only 0.10% to 0.15% per transaction.
The main thing that makes card transactions more expensive is the merchant bank assuming chargeback risk, but that's because card payments are an entirely different transaction type. Pix is digital cash. You typically cannot get refunded for any reason. Cards are not digital cash. You can get refunded for fraud and unauthorized transactions.
Visa debit, maybe, but they're way higher for Visa credit.
> The interesting thing is that Visa's payment rails are cheaper than Pix. Pix charges businesses 0.22% to 0.33% while the Visa network rate is only 0.10% to 0.15% per transaction.
This is not factually accurate. Pix also has fraud controls built into the platform, and does fine doing far more volume than credit card rails in Brazil. It is an objective success, having avoided US financial service firms from skimming hundreds of basis points of total economic activity out of the Brazilian economy.
Brazil's Pix payment system faces pressure from Visa and Mastercard - https://news.ycombinator.com/item?id=48052371 - May 2026 (383 comments)
Brazil's Pix ‘much cheaper' than card payments, paper by central bank economists shows - https://www.reuters.com/article/business/brazils-pix-much-ch... - March 23rd, 2022 ("Brazil’s Pix retail instant payment system is “much cheaper” than card payments for merchants, according to a paper published Wednesday by the umbrella body of the world’s central banks, highlighting its growth potential for businesses after its vertiginous rise among individuals. The paper, which was co-authored by economists at the Brazilian central bank for the Bank of International Settlements (BIS), says Pix costs an average of 0.22% of a transaction’s value for merchants, whereas debit cards cost slightly above 1% and credit cards reach 2.2% in Brazil.")
Payment technology complementarities and their consequences on the banking sector: evidence from Brazil’s Pix - https://www.bis.org/publ/bppdf/bispap152_c.pdf - December 2024
> In this paper, we employ an instrument and individual-level banking data in Brazil to examine the effects of a novel payment technology, Pix, on the use of other payment technologies and its impact on the banking sector. We find evidence that Pix increases use of the four most common payment technologies in Brazil among individuals and firms. Furthermore, our empirical evidence suggests that Pix contributes to an increase in the number of bank accounts, their use and access to credit, benefiting different types of banks. The findings indicate that the implementation of new payment technologies yields advantages not only for firms and individuals but also for the broader banking and payment industry.
I don't think adding a 0.5% surcharge to transactions over Rupees 2000 is "pound foolish". Most transactions are smaller, and someone has to pay to maintain the infrastructure. :shrug:
Also: just because money is being wasted on cause $X does not mean that there's more of it lying around to be wasted on cause $Y! You've got to draw the line somewhere!
> someone has to pay to maintain the infrastructure. :shrug:
Under Indian law, companies must spend 2pc of their net profit on CSR activities (corporate social responsibility). Ask banks to use that money. The Indian banking sector made a combined profit of $40B this year. 2pc of that is $800M. Close to the $1B number.
> You've got to draw the line somewhere!
Draw it in the farm sector! They do not have to pay income tax on their income, get subsidies on fertilizers, free electricity, guaranteed prices for their crops. Small farmers cannot take advantage due to average holding size, and large farmers laugh all the way to the bank!
Is "2pc" the same as 2%?
Yes. Habit from typing on the phone where the % sign is hidden away somewhere on my keyboard!
Why to women?
India is a conservative society. Women are 50% of the vote bank. They actually vote in larger numbers compared to men in many constituencies. They manage households and are very quick to notice price increases etc. The free bus rides and cash handouts are basically a transparent attempt to buy their vote. It is what it is.
I wonder when Marx wrote "religion is opium for the masses" he had India in mind because goddamn it fits perfectly.
It's a bargain and exactly what governments are for. It's 70¢ per Indian. It's a payment highway and commerce is good.
edit: replied to comment was rephrased during reply.
I really hope cash transactions become a little more normalised in India.
The UPI experience is built for a single audience in mind. It has changed the way people transact in India but at the same time it's been an absolute nightmare for a tourist to play along. The only route for a tourist to use UPI is via third party apps, which charge a markup for loading money (3%). But let's say you accept that as a part of travelling - the limitation of tourist wallets is that they can't be utilised for P2P payments - exactly what UPI is most used for across the country.
Alternative, since no one accepts cash anymore, is that I have to carry thick wads of cash so I can hand out exact change. That still gets you the stink eye because most vendors don't like to deal with cash anymore.
> the limitation of tourist wallets is that they can't be utilised for P2P payments - exactly what UPI is most used for across the country
Same issue in a lot of Southeast Asia. After jumping through all hoops to get the correct app, id verified and paying a hefty fee, it was still a gamble if the restaurants would have a business QR code or a personal one.
One time in Laos I was on an island that didn't have an ATM, almost no cards were accepted and I had run out of local currency. So I ended up asking for the QR code before ordering at the restaurant to make sure it would work out.
In India it's super annoying when taking autos because the drivers won't have change and in 99% of the cases they have a personal code. So I just ended up using Uber with credit card, much less hassle.
I don't know, central banks seem super afraid of money laundering somehow. But just allow me to spend $100 or what, I just want to buy a quick coffee or a fruit from a street vendor, not a Rolex.
So a country of a billion+ people should reverse its very successful digitization efforts because a handful of tourists can’t be bothered to pay a small surcharge?
Smaller, in fact, than what they pay in their own country for credit card fees.
>The UPI experience is built for a single audience in mind. It has changed the way people transact in India but at the same time it's been an absolute nightmare for a tourist to play along.
Indian built UPI for a single audience AKA their citizens
This issue isn't the surcharge but there are still limitations to it. The commercial banks really need to do something like this themselves.
Well they do, but last time I looked you needed to physically go to a branch, but not all branches do it - yeah I'm not going to spend half a day on my trip just to pay slightly easier. It needs to be something you can sign up in the airport in 10 minutes for.
Every time I've been to India I just ended up finding an ATM (that works with my card) and carrying around massive wads of cash. I even stayed at a hotel once that couldn't take international cards.
Sounds like it would be easier to hope for a better UPI experience for tourists.
In 2026, you think cash could become more common instead of less? There is no way that happens unless they jack the fee up and even then…
If you're worried about the markup for loading your digital wallet, what is the markup for any tourist trying to get cash from eg. Thomas Cook? I doubt any tourist could get currency at a significantly cheaper rate.
> P2P payments
Some P2P is between family/friends. Or you are paying rent etc. But a lot of it is business transactions that move funds from one savings account to another because the auto driver is accepting a payment in his mother's or wife's account or something similar. There is so much friction in the banking system if you have to create a current account that this is pretty common.
The system needs to improve drastically to support the two sides instead of letting it be. Should help your use case as well if that happens
UPI is not perfect but me as a white piggu tourist handling monopoly money isn't much better.
Is this a common experience now? I haven’t been there in a while, but one used to be able to use credit cards at bigger establishments and smaller vendors used to accept cash even if UPI was advertised in their shop. Rarely was anyone mad that you didn’t use UPI.
> The only route for a tourist to use UPI is via third party apps, which charge a markup for loading money (3%).
Or a credit card.
Don't visit India, problem solved.
> it's been an absolute nightmare for a tourist to play along.
But the solution to this should be to simplify the tourist experience and to allow payments from foreign banks and cards. Traveling to China has a huge hassle in the late 2010s due to everyone local switching to WeChat/Alipay but it not being available for tourists, but in the last few years (I last visited in 2023), you could use WeChat/Alipay with a non-China bank card.
I mean this sounds like an edgecase, which is good tradeoff for the ~billion of people who this system is designed for.
Essentially UPI was there to stop the industrial fraud and money laundering that was going on india. I have not actually checked the efficacy of this though. The last time I checked was when modi made the largest bank note not legal tender.
That part aside it does sounds like VAT (a 20% sales tax on all purchases) but for transactions.
It affects everyone who visits India, so it's not really an edge case. I'm sure there are plenty of towns in India that is primarily tourism-based.
> which charge a markup for loading money (3%).
.... the markup being what the credit card companies charge them.
> it's been an absolute nightmare for a tourist to play along. The only route for a tourist to use UPI is via third party apps
An NRI account with PhonePe is good enough as someone with OCI, but even in my ancestral town and village Visa and AmEx adoption by payment processors has been high despite no real diaspora or tourism.
And there's no real point in optimizing for the kind of tourist who's going to go visit a slum like Paharganj or go to Kasol to partake in drugs.
That said, I guess it also depends on where an NRI or PIO is from as some states have better payment processor penetration than others.
But tbf, when my SO and I go to VN to visit family, it's the same story there (Momo/Zalo and cash rule Vietnam outside the tourist bubble of D1/D3/Thao Dien/Da Lat/Da Nang/Hanoi and we resort to her Vietcombank account).
Not being able to pay for things is a pretty fundamental problem even for a business traveler to Bangalore.
Last time I bit the bullet and set up Mony, which at least got me access to UPI, but it's limited mostly by government policy: you can't complete the KYC process until you've physically landed in India, can't transfer to personal accounts, fees on adding money, fees on keeping money (they charge "unused balance" fees!), etc.
> Not being able to pay for things is a pretty fundamental problem even for a business traveler to Bangalore
In what situation were you as a foreign traveler where you needed to pay UPI?
Convenience stores and hypermarts like Reliance SMART/Digital and DMart or QuickCommerce platforms like Blinkit accept Visa and AmEx credit cards. Transit via Uber, Ola, and co accept Visa and AmEx credit cards. And most restaurants and bars targeted at outsiders accept Visa and AmEx credit cards. And Hotels accept Visa and AmEx credit cards or can be booked via platforms that accept them like AirBnB.
So transit, residence, restaurants, and convenience stores (all of which will be reimbursed by your employer) are all doable via credit card.
Fundamentally, UPI was built for India3, as were other peers across Asia, not foreigners.
But my SO and I never understood the tay ba lo mindset. Catering to them is what kept Thailand and the Dominican Republic stuck in tourism-induced Dutch disease because it incentivizes extractive and low productivity economic sectors like real estate and low skill services at the expense of human capital development and investing in high productivity industries.
> In what situation were you as a foreign traveler where you needed to pay UPI?
All the time? Credit cards are only accepted by fancy places and cash is increasingly a hassle, especially in a tech-forward place like BLR.
The final straw was when I bought some biryani at a shopping mall food court and tried to pay cash. They had no change, the neighboring stalls had no change, and this wasn't some plot to extract money from the gora, they genuinely didn't have and couldn't find small bills.
In the end they tried to wave it off and discount my meal by 40 rupees or something, and I rounded up by 60 instead. And I remember thinking I probably just created another problem, because now they need to balance the books and parcel out the cash tip without change.
> In what situation were you as a foreign traveler where you needed to pay UPI?
If you live in a tiny bubble and only take an Uber to the Work Campus, Uber to the small number of marts you've found that accept card, Uber to the small number of restaurants that accept card... you have to find them first of course.
Want to buy some cigarettes while you take a stroll in the evening? Good luck. Want a tuktuk to take you a mile across the beautifully walkable road infrastructure? Good luck. Want to get lunch with friends? Good luck.
90% of life doesn't exist inside the corpo "work hotel sleep" bubble, I described it to somebody as akin to trying to pay with bank transfer in the UK, technically you can do it... the manager will come out and spend 20 mins futzing, taxi drivers may be able to do it if you ask nicely, your shopping options will be very limited and far between because you're trying to transact in the non-predominant medium.
Yes, loads of places accept card, larger stores accept card, want coffee? Blue Tokai accepts card. Want Blinkit or Zomato? You need an Indian number first. Want a Hotel? Booking.com is predominantly "pay at the hotel" across most of India, which means it's a dice roll as to whether they'll accept card. You'd be surprised at how many hotels completely forget that not all customers are Indian+Aadhaar+UPI, except by the time you've got there and realized they accept neither C-form nor Card despite telling you explicitly they do - you've already spent the time, money and effort getting there only to find out that no... it's not practical in reality for you to book a hotel and pay for whatever reason. Repeat ad-nauseum everywhere daily
> Want to buy some cigarettes while you take a stroll in the evening
Why would you go buy a beedi from the local paan-wala?
> Want a tuktuk to take you a mile across the beautifully walkable road infrastructure
Why would you call an auto or e-rickshaw when you could call and pay for via Uber (which also does autorickshaw pairing)
> 90% of life doesn't exist inside the corpo "work hotel sleep" bubble
OP was talking about "business travel".
> You'd be surprised at how many hotels completely forget that not all customers are Indian+Aadhaar+UPI
They aren't forgetting. They just don't care about a foreign traveler. It's the same when I travelled to China outside of the foreigner bubble on multiple occasions
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At the end of the day, foreigner who can afford India1 but is consuming like India3 is a waste. Doesn't matter if it's a backpacker or a kanjusi NRI.
Why would you go for a masala dosa with filter kaapi with your colleagues when you could order a hamburger from room service? Why would you hail an auto when you could just charter a helicopter instead?
Isn't 0.5% very competitive and basically nothing compared to taxes on the transaction?
Here in Poland we have a budding "save cash" movement. And they make some good points about freedom and privacy but are the loudest about the processing fees when mostly it's a way for smaller merchants to avoid paying taxes. Which is fine, I think they should be exempted anyway, but let's not pretend that it's the 0.5% in fees rather than the 30% in taxes.
People want every government service to run at a deficit and maximize the amount of pain inflicted to billionaires. They don't even need them to balance - they're just both good.
The difference is that 0.5% on the whole payment, might in some cases be actually much more than taxes on the profit. Or even worse, if you sell for whatever reason without profit, the tansaction fee is your loss.
Standard VAT in Poland is 23% so taxes usually dwarf fees.
0.5% gross on a 1% margin business (which is most retail) is egregious.
I would like to know where that 1% retail business is located. My family has a bunch of hardware/electricity retail businesses and the margins are way more than that. Like 30%-500%.
In Poland fees are capped at 0.3% for credit card, 0.2% for debit per EU. Which is why generally in the EU you don't have the insanity with credit card loyalty programs.
Only the interchange is capped. The merchant has to also cover network and processor fees. And then there are some uncapped transaction supposedly so the fee covers this risk. Comes out to 0.6-0.7% for a smaller merchant with the card present.
One person’s insanity is another person’s interesting puzzle and optimization problem.
UPI payment has enabled tracking actual sales data and helped with tax collection. This is an intangible benefit which is likely to go away with the introduction of the fee.
How would a fee preclude tracking sales data and collecting taxes?
Small merchant will stop taking UPI
Right, this has second and third order effects. I am sure this must have been brought up during the discussions and overruled for whatever reason. The bureaucrats and politicos involved are not stupid. But there is some game being played here.
0.3-0.5% is still nowhere near the rates of visa and mastercard. Does UPI offer the same level of fraud protections or is it a free for all like Zelle is here in the states? Especially if they limit to > 2000 rupees.
Hopefully they allow foreigners some track to access UPI in the future.
Aren't debit transactions capped at 0.2% in the EU and credit 0.3%?
No, those are caps on the interchange fees paid to the issuing bank. Card transactions have other fees as well.
in the EU, yes, but not in India with UPI ;-)
Visa & MasterCards actual take is way lower than that. The fees that merchants see on cards are mostly collected by the banks - "interchange".
> Hopefully they allow foreigners some track to access UPI in the future.
https://havemony.com
Not cheap and only to business QR codes (so proper shops which probably will take credit card anyway), but it works.
> the system is now available in some form for payments in 11 countries outside India.
I see this often cited, but in reality it's a farce. "UPI is international" the staunch defender says, so I rebut "Yes, in one place at the Eiffel Tower... everywhere else? The French have no idea what UPI is, and your bank will charge you stupid FX fees for card payments".
Meanwhile if I'm in India, people look at me weirdly for paying with UPI yet most won't take card payments outside of tourist areas or it will get declined because foreign cards are blocked - and if you try to pay cash suddenly nobody has any change, will refuse to take the 20 rupee note they gave you yesterday, or have concerns about whether the notes you literally just withdrew from an ATM are legitimate - meaning you can end up with notes that are defacto unspendable despite being perfectly legal tender and in acceptable condition.
And as a tourist... you want UPI? There are a few ways but they're byzantine, apps locked to the Indian App Store (for tourists?), in-person KYC upon landing, very low first-payment limit, topup/signup and idle fees that push the net fee % easily into the 5-10% range.
Lets look at a perfect example... you pre-KYC on an app ahead of your trip on the one app that allows remote KYC, but you can't load money onto - first you must provide your visa, but the eVisa doesn't count they want the actual visa stamped in your passport. You land, immediately after customs you submit the picture of your visa stamp and wait an indeterminate amount of time, it could be 8 hours, or 24 or 48 or it could get rejected and you could be required to do in-person KYC (either you go to them, or they come to you within a ~5hr window... but only in the major cities).
So day 1 it's impossible to use UPI. It gets approved on day 2, you take a taxi somewhere maybe a nice restaurant, your UPI is now loaded with INR and you try to pay the driver... Your driver has a personal UPI account, you can't pay him! You only have cash... Large denomination INR notes because that's what the ATM provides, he doesn't take card and refused to admit he has change. You eat the already inflated cost and swear to only use app-based services (assuming the Taxi Mafia hasn't had them banned in your city).
You get to the resto and enjoy a meal with your friends, it's a nice place and somewhat expensive, you come to pay, the bill is reasonable and you think "I will pay with UPI", you try paying, it's a business account so should be OK! NO.... You have exceeded your first-day limit! Waiter tells you there is no card machine, and they have no change for cash...
Eventually you leave India, there's a non-trivial amount left in your tourist UPI account, you look for somewhere to withdraw it back to your card - no physical counters open at the airport, you request a withdrawal via the app... it never comes, the next month you get hit with a 500 INR inactivity fee, your visa expires and the app shuts down, next month 500 INR inactivity fee - can't make support requests through the app any more because your visa is no longer valid... Your balance slowly goes to 0 because you didn't think to spend every last rupee on your way out so it gets eaten by the system.
I say a small sub-1% fee on UPI is fine, it's great infrastructure when it works, but more needs to be done with global UPI integration. I have QR enabled payments available across maybe 10 different countries and India sticks out as being the one that's consistently an absolute pain and actively works against you.
> I have QR enabled payments available across maybe 10 different countries
Any experience or rec's for Thailand?
Unfortunately Moreta disabled Thai PromptPay QR payments recently except for US KYC'd people due to some compliance dispute. There's also lbank.com but I can't confirm if they currently work in Thailand (lbank has an... interesting reputation, I can only use it via TestFlight, but works for my daily food spend needs)
Otherwise you're stuck with AliPay+ merchants (easy via Wise) or TAGTHAi which should still work but is expensive and sucks.
--
I forgot about https://p2p.me - they're taking the regulatory arbitrage 'personal travel payment concierge service' approach, basically "work around the problem, not with it" as the founders realized the people making the regulations neither know nor care about on-the-ground practicalities.
This is the reality.
POSIWID. Purpose of system is what it does.
Counterpoint: These are temporary growing pains that will be resolved in 10-ish years.
Yesterday an article on tipping hit HN and this reminds me of it. When you remove barriers people spend freely. Start throwing stupid pause moments, the value doesn't match the advertised price because of x fee, y tax, z undisclosed service or an outright wall screen begging for a tip, and people slow down their purchasing. It will be interesting to see an impact here if this goes through and it could be instructive to the value prop that tips bring to industry. You may think you are externalizing a cost but maybe you are really harming sales.
The Australian experience of allowing a transaction fee is simply that every single transaction adds the maximum amount.
After whatever maybe 15 years that have banned the practice.
This is very surprising because the proposed rates would equal or be higher than regulated interchange for Visa and Mastercard in Europe.
I thought the regulated interchange rates for Visa and Mastercard in Europe were tiny (compared to the US).
Title is: UPI: India built the world's biggest digital payments miracle. Now comes the bill
Ever since someone brought up this system a while ago and confused it with a Real-Time Gross Settlement (RTGS) system https://news.ycombinator.com/item?id=48875605 , it has been bothering me that seemingly no one is talking about the real long-term cost of this "free system."
The history of payment systems is a history of risk. A quick primer,
All large-scale payment systems that interface with banks must have an answer for the inherent conflict between what the bank does (i.e. provide debt) and how it does it (by taking savings).
If the purpose of banks is to take capital from customers and use it to provide debt to others, then how much money should they keep for their customers' withdrawals and transfers?
If you do constant transfers back-and-forth 24x7 multiple times a second, then banks need a lot of capital at hand to manage the liability.
So even though gross settlement is supposed to be real-time, most RTGSes allow banks to borrow from their government's central bank via an "intra-day credit" system and then effectively net / settle at the end of the day, https://www.newyorkfed.org/research/epr/08v14n2/exesummary/e...
This loophole in a supposedly real-time system reduces the amount of money that banks "actually" owe each other. This allows banks to keep smaller reserves and provide greater amounts of capital to their customers.
You can see the different daily settlement points for the US here, https://www.federalreserve.gov/frrs/regulations/ii-federal-r...
But if you net only a few times a day, it creates risk. What if a bank becomes insolvent in between? Then it wouldn't be able to meet the obligations created by its customers, which would mean that other banks would fall short on their obligations and so on.
It's a network contagion effect; which is partly why the US Fed spent the better part of a decade studying counter-party risk in settlement systems before designing the latest version of its RTGS.
The Fed has protocols in place to stop such contagions before they start. Does the Indian government and its central bank? Where's the capital required going to come from? If a bank fails, who pays for its obligations? The Fed (currently) has a free infinite money glitch backed by the US Military, but the Indian government doesn't. So... where's that money going to come from?
Who is underwriting this system? Have they modelled systemic collapse? Because given what I've read about Indian banks and their bad debts, https://www.bbc.com/news/world-asia-india-58654740 it's a when not an if.
Cue a billion people panicking...
Apparently even BBC reporters now use LLMs to draft their articles.
Totally understandable. No human working at BBC will ever write a neutral or positive story about India