Reform the UPI system: We need sustainable digital payments infrastructure
₹18.3 trillion, respectively. Such a large-scale shift to digital payments was unthinkable in an emerging economy like India till a few years ago. What is praiseworthy is the trust earned by this payment mode from millions of people, a large fraction of whom are not tech-savvy.
UPI transactions have crossed 80% of the total digital payments through various modes in the country. There is no charge on UPI transactions, either peer-to-peer or customer-to-merchant. Many attribute this as the reason for UPI’s outreach and success.
Notably, enablers of the UPI system are only partly compensated for their costs by a government scheme. There is also the issue of a non-level playing field between UPI and other payment modes such as debit and credit cards, Immediate Payment Service (IMPS), etc, which charge transaction fees. The UPI operates in a monopolistic environment.
National Payments Corporation of India (NPCI), an initiative of the Reserve Bank of India (RBI) and Indian Banks Association (IBA) that owns the UPI platform, is India’s sole provider of digital payment infrastructure and faces no competition from any other entity. Notwithstanding the good job done by NPCI, some questions arise for wider public discussion. Should UPI continue to monopolize the country’s digital payment infrastructure? Should UPI transactions continue to be free of charge? And should NPCI continue to be a not-for-profit company? The answers to these questions are inter-related.
As for UPI’s monopoly, some argue that such infrastructure is a public good and the private sector is not best suited to provide it. This argument can be contested, as any monopoly tends to encourage complacency. An appropriate business model and regulatory oversight could
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