Join the discussion
Write your take first — we'll ask for email only when you're ready to publish.
- Hacker News
- Title is: UPI: India built the world's biggest digital payments miracle. Now comes the bill
- This is very surprising because the proposed rates would equal or be higher than regulated interchange for Visa and Mastercard in Europe.by hx833001
- I thought the regulated interchange rates for Visa and Mastercard in Europe were tiny (compared to the US).
- In reality it’s closer to 0.5-1% in Europe since banks apply their own fees on top of the regulated interchange rate.by wasfgwp
- 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.
by wewewedxfgdf
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....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....by TheqO- 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.by jmward01
- Key Points:
The government has yet to decide the rate or exactly where it will apply, but proposals under discussion include a merchant discount rate (MDR) of 0.3-0.5% - a small fee paid by a business to the banks and payment companies that process its UPI payments - on larger transactions at big businesses.
The government says consumers and person-to-person UPI payments will remain free. If merchant fees are introduced, they will apply only to some transactions above a set threshold, at a nominal rate, meaning most UPI payments will remain free.
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.
That could generate a sizeable new revenue stream - up to a billion dollars, by one estimate - for banks and payment companies while leaving the everyday smaller payment to the neighbourhood grocer effectively unchanged.
by rramadass - > 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.
- POSIWID. Purpose of system is what it does.by flerchin
- This is the reality.by elephant81
- > I have QR enabled payments available across maybe 10 different countries
Any experience or rec's for Thailand?
by thesimon - Incredibly, WeChat Pay in China is now easy for foreigners: submit a copy of passport, link a debit account, and you can use WeChat Pay with no problems. No physical presence in China required, and the only restriction is that you can't use it abroad (i.e., at WeChat Pay stores outside of China). I've had a fully working WeChat Pay account for a couple years now, and I've never once had to do anything in-person or anything except upload my passport and Tencent made it happen.by Shank
- 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.
by HaloZero - > Hopefully they allow foreigners some track to access UPI in the future.
Not cheap and only to business QR codes (so proper shops which probably will take credit card anyway), but it works.
by thesimon - Visa & MasterCards actual take is way lower than that. The fees that merchants see on cards are mostly collected by the banks - "interchange".
- Aren't debit transactions capped at 0.2% in the EU and credit 0.3%?by zipy124
- Most US debit cards are 0.1%. Credit cards have to give the user a 0% loan for 60 days, someone has to pay for it including debt write offs. Can't compare a debt product with a cash product.by adrr
- 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.by Karthick81
- How would a fee preclude tracking sales data and collecting taxes?by nonethewiser
- 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.by sieve
- The government being able to monitor and control how every individual spends money is a double-edged sword thoughby wasfgwp
- 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.
by blfr - 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.by stefan_
- 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.by nonethewiser
- 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.by samsk
- 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.
by gsa - 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.
- > 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
by sieve - 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.by ssivark