For those outside India and/or non-active users of UPI - it drives so many transactions that even for an engineer, I forget how often I use it:
- Payments between family members
- Payments for every tiny/small item - a bag a chips or a cup of tea for example
- Payments for car mechanic, plumber, or other services
- Payments for online shopping or services - yes web apps show the UPI QR code and I can pay from my phone by scanning. Mobile apps will simply open the UPI app's payment screen
- Buses, flights, trams, taxis, trains - online or on road
On an average day in a city like Kolkata, me and my partner make up to 20-30 transactions. I live in a small Himalayan village most of the year and I still make roughly 6-8 transactions a day.
miki123211 9 hours ago [-]
Systems that are based on one-time codes instead of permanent credentials are really under-appreciated in the anglosphere.
Giving your credit card to your child / friend / spouse / subordinate, so that they can buy something with your money, is a lot more risky than giving them an OTP, valid for a single transaction, which you have to approve in your app anyway.
Poland's Blik is based on 6-digit codes, which makes this feature even more useful, as you can E.G. dictate that code over the phone to a trusted acquaintance at the ATM.
navigate8310 5 hours ago [-]
Because those OTPs can be intercepted by any MITM unless you are using on-device 2FA generated by an app.
jingpostmedia 5 hours ago [-]
[flagged]
dolphenstein 11 hours ago [-]
After adding UPI as a payment option to my little microSaaS, I'm finally starting to see sales in India. Was like trying to extract hen's teeth to get an Indian to sign up before that.
porridgeraisin 9 hours ago [-]
Yes this. Anytime a SaaS supports UPI Autopay, I'm 10-100x more likely to subscribe.
For context: it's basically a recurring payment but you open the Autopay section in Google pay or whichever app and it shows you all your subscriptions right there (which is a major +), the transaction history, and cancellation happens in the UPI app itself I don't have to faff around in the SaaS and deal with potentially some dark patterns.
dyauspitr 4 hours ago [-]
That’s absolutely huge. All your subscriptions in one place that you can just turn off from there directly. It’s one of my favorite things about payments going through the apple App Store.
inigyou 7 hours ago [-]
Do you have plans for when the government interprets your small payments as terrorism and seizes your bank account?
I think every country goes through this and then goes back to cash, but at different rates.
hgoel 4 hours ago [-]
Why would they interpret a system being used for the purpose it was designed for as terrorism? Using it for small purchases is one of the intended use cases, e.g. allowing street vendors to accept digital payments, incentivising them to have a bank account and reducing the risk of theft.
lxgr 7 hours ago [-]
Do you have any examples?
navigate8310 5 hours ago [-]
This is implied in an authoritarian country like India.
However, the Government is in a fix. Almost the complete stack is subsidized by the Government. This led to an explosive adoption growth for merchants as there is no MDR and payers for ease of transaction as they don't need to carry hard currency anymore. This has enabled the Government gaining complete insights into spending and earning patterns. Withdrawing this massive subsidy will again lead to people using cash. So in order to prevent "terrorism" they will subsidize for the foreseeable future.
rdksu 5 hours ago [-]
India is not an authoritarian country ffs
kasey_junk 4 hours ago [-]
It’s not, and calling it so is wrong.
But it is a country with extremely illiberal capital controls and a history of questionable enforcement due to perceived corruption.
It’s such a good payment system it’s overcome these concerns in large part, but they are reasonable concerns to have.
uwagar 4 hours ago [-]
lol
elendilm 21 hours ago [-]
I have the utmost respect to people who makes UPI work. Made even the old people in the nation completely go digital for payments - a feat unparalleled in the world.
brabel 8 hours ago [-]
I think it was the same with PIX in Brazil, and Swish in Sweden, and probably many more precedents.
vickychijwani 5 hours ago [-]
Don’t know about Swish but UPI heavily influenced Pix, from its open architecture, alias-based addressing, and QR code infrastructure
dyauspitr 4 hours ago [-]
They are not precedents. Infact PIX heavily borrowed from UPI.
dominotw 17 hours ago [-]
it worked because india never had credit card payments( at scale ) . they went straight from cash to digital payments.
sometimes_all 15 hours ago [-]
What does this have to do with credit cards? India always had credit cards at a scale comparable to most countries, and they always were a regularly-used of payment for medium-sized "white" transactions; they just weren't that useful for day-to-day transactions in terms of most locals' ways of working where the actual India-level scale is, and not the primary way of transacting as in the US. And looking at how Visa and Mastercard work, and what they tried to do in Brazil, I think that's a great thing.
As GP says, you could _never_ get the older generation to use a credit card even when they had the means to do so. But they took to UPI just fine, and many now prefer it over cash.
Also, credit card issuance and acceptance in India is growing quite a bit right now, despite (because?) of UPI.
nafey 14 hours ago [-]
Most mom and pop stores (Kirana stores) in India cannot get a PoS device easily. UPI solves this problem by being much easier for merchants to onboard and start accepting payments with just a QR code instead of a PoS device.
mayama 14 hours ago [-]
Not just about PoS device. During early credit/debit card days, lot of stores would pass on merchandise fees directly to customers, giving discount in case of cash transactions, some stores still charge extra. This is not allowed in west as credit cards require same price as cash transactions, and most users perceive credit card rewards as something positive as one would lose out on this rewards when using cash. In India perception is that one would be making loss* if using credit cards. UPI with no fees as of now, is perceived as equal to cash by most people not dealing with black money.
14 hours ago [-]
lxgr 7 hours ago [-]
> This is not allowed in west as credit cards require same price as cash transactions
Network rules disallowing customer surcharges have actually become prohibited by law in quite a few places.
StrangeClone 5 hours ago [-]
Discounts coupons are legally allowed based on payment method type. Seller often provide discount coupons when you use UPI payment method.
oasisbob 12 hours ago [-]
When people here are saying "credit cards" are we talking about purely domestic networks, or what?
Visa and Mastercard payment rails are somewhat disjoint, even for large Indian companies. As a foreigner, there's always been a huge acceptance gap vs many other countries when you want to use a card.
dominotw 2 hours ago [-]
I think your comment is in bad faith. so i wont explain what i meant.
altmanaltman 13 hours ago [-]
It has everything to do with credit cards if you understand what the parent comment is saying. Credit card allowed people to use something else other than cash when internet banking/digital payments wasn't available and smartphones were not a thing. Their entire society adopted credit cards as a very normal way of payment even for everyday stuff since it offers convinence over cash and rewards.
Yes India got credit cards but it was not widespread and people did not use it as a daily thing since most stores/outlets did not have the card swiping system. UPI solved this problem very well since you just need a QR code and a valid bank account and no transaction charges making it perfect for day to day spending.
We got digital payments and smartphones together. But in the US for example, credit cards came much earlier and were able to capitalize very well since there wasn't a lot of the technology at that time which we take for granted today.
sometimes_all 12 hours ago [-]
Well, yes, but you conflate that credit cards would've worked, had they been available/easy, in a place like India, which in many ways rejected and still sometimes rejects the kind of thinking which makes credit cards successful in places like the US, which is what the GP was saying.
People up until one-two generations ago completely rejected the use case for credit cards for payment, since they just did not want to swallow the premise of using credit as a payment instrument. If that doesn't happen, credit cards do not take off (just as what you are saying). The problem wasn't as much as systems were not available; systems were available but people did not want it. Merchants swallow the cost if the demand comes (this is what is happening right now; credit cards are becoming mainstream despite UPI being there, because younger generation loves using them, and more merchants than before are allowing credit cards on UPI even though they can reject them, because people want to use credit on UPI as well). People at that time just did not want to use credit, so merchants had no incentive to bear costs. Kali Mody brought Diners Club to India in 1961 (my father has fond memories of that instrument). CBI introduced the first bank-issued credit card in the eighties. The system was _always_ there. People just didn't feel they wanted to use it.
People also forget that UPI is not just for consumer-to-merchant. It's also a P2P system, which credit cards definitely aren't.
You make a system that people want, people will use. People used UPI.
altmanaltman 9 hours ago [-]
I'm not sure what you mean. You also need to look at the whole environment and other factors than just "People just didn't feel they wanted to use it". In 1961, India was extremely poor and it has been until the 90s. Credit cards at that time did not solve any problem, people had no use for them and the culture of using it never grew as it did in the US but UPI gained acceptance because the country was doing much better and it was easy to use. That's what we were discussing.
You seem to either not have an understanding of ground reality (if your father was using Diners Club in the 60s, he was in the elite). But the system "being" there vrs the environment of the system actually being useful are different things. People did not reject credit cards at that time due to idealogical reasons, they rejected it because there was no point for them.
By the time, we stepped up in commerce, digital payments like UPI were easily available. This is why most people say we skipped the credit card phase and went straight to digital payments. Nobody is saying India did not have credit cards but look at adoption rates and the economic reality of India in the 60s to 90s and you will see many factors that prevented this that are not realated to the technolgy or idealogy at all.
sometimes_all 8 hours ago [-]
> You seem to either not have an understanding of ground reality (if your father was using Diners Club in the 60s, he was in the elite).
Well, I wouldn't say "elite", but well off (at that time), but that still doesn't mean that card networks couldn't have made themselves useful if they/the government wanted to. Poverty is not a gating mechanism. Plenty of poor people in the US use credit cards - they practically fund the rewards system since they cannot pay on time - and I seem to remember that the first Americards were figuratively dropped from the skies, regardless of the holder's income or debt levels, which was then used to coax merchants into accepting them. Such sort of "growth" tactics would not have had an effect here since neither the government nor RBI would allow it, nor would the people take too kindly to it. And let's not disparage people for not understanding ground reality. What I'm saying still has basis in fact, just possibly not the facts you seem to care about. The point about people not wanting to use credit cards still stands. Just talk to someone > 60 years old and you'll get the drift. Many wouldn't touch a revolving credit feature here even if it was forcefully handed to them and they could easily use it. As much a fan my dad was of Diners Club, he still told me to not touch a credit card until I had at least twice as much income as expenses.
I don't disagree with you entirely, and your points are not the reason I talk about the sixties and eighties; I talk about them because many people seem to think that India did not have the systems there at all, and that India did not have enough well-off people in the past at all, or that India did not have any sort of knowhow or capability to introduce systems like credit cards (and make it work for quite a bit of the population) at all. That part is incorrect. The systems were there, they just failed for the "hundreds of millions" at that time while still working for the "few million", plus they still hung around enough to succeed now because clearly the potential was always there. Just because they didn't catch on quickly did not mean that they weren't there or were not useful to a subsection of the population. You cannot just go "straight to the digital payments phase" without acknowledging that things were there and what their trajectories were. People seem to forget that relative small scale "of solving problems" for India in terms of adoption is large-scale for other countries. A single-digit percentage acceptance in this country can swallow many countries' populations, poor or otherwise.
treenode 9 hours ago [-]
India has a robust Debit card system instead of Credit cards.
drewfax 12 hours ago [-]
Yes, UPI works. But it's a terrible system for privacy and autonomy. It has so many intermediaries, requires phone number and linked to person's identity. It should not be called a peer-to-peer payment system in anyway. It is controlled by the government rather than Visa or Mastercard. That's the only the difference.
stAInley 9 hours ago [-]
Sure, but visa and mastercard share their transactions with the US government (among others).
"Hot Watch": where the US gov gets real time surveillance on a target.
Bank Secrecy Act: where private networks and their issuing banks are legally mandated to act as unpaid deputies for the state.
At least with UPI you're sharing with less governments?
thedelanyo 9 hours ago [-]
Money after all is controlled by the government anyway.
9 hours ago [-]
ksec 2 hours ago [-]
PIX from Brazil which is extremely similar to UPI.
Are there any reason why we can't have a global UPI system? Open Source with each Government running their own instances.
HexDecOctBin 1 hours ago [-]
UPI has been adopted by eight countries and a few dozen are in progress [1]. Additionally, UPI has started to integrate with other nation's similar system (Singapore's PayNow [2] for instance).
UPI is cool! Anyone can put numbers to how this affects the growth of india? Formalizing parts of the economy perhaps?
pzmarzly 24 hours ago [-]
22B transactions a year mean an average of ~700 QPS for the NPCI switch. Of course the traffic is not uniform, it probably peaks at many times that number, but that still doesn't sound that bad - for comparison, a quick Google tells me Nasdaq TotalView ITCH feed peaks at 100k+ QPS at market open.
vinay_ys 22 hours ago [-]
The right comparison for Nasdaq's order processing volume or messaging volume would be India's National Stock Exchange (NSE). It does more executed orders per day than nasdaq.
I worked on scaling UPI a few years ago. Real-time Payments is vastly more complex as it is much more distributed - each transaction involves the two banks holding funds, two end-user apps (and their banks), and the network (npci) – for the payment to complete end to end, multiple message exchanges need to happen between these parties while the user at both ends are waiting. So, if you measure the scale in messages/sec it would 10-25x higher.
Real-time payment rails that works 24/7 365 days a year from any bank to any bank (domestic, no exceptions) for free is truly a game-changer. Compare that to US payment rails which is slow and expensive. Apart from UPI, India has 3 more payment rails – NEFT (similar to ACH – batch settlement), IMPS (similar to UPI, instantaneous - but different user experience), RTGS (real-time, intermediated by the central bank RBI, but only for high-value transactions) – all are 24/7/365 and free. Then, there's credit card rails – apart from Visa and Mastercard, India also has RuPay which has much lower interchange rate.
dj0k3r 20 hours ago [-]
None of them are free, most banks now charge nominally (look at NEFT and IMPS charges). UPI itself is paid off by taxpayers.
Also RTGS is the only ISO 20022 complaint payment rail (back when it wasn't globally very common) - something that needs to be appreciated more.
People need to realise what NPCI offers is vastly different from what RBI offers. In my opinion what NPCI is offering will end up negatively impacting the general population in the long run.
sometimes_all 15 hours ago [-]
NEFT and RTGS are free if you do it online. UPI is free. Many banks waive off IMPS charges.
NEFT and RTGS were introduced in the mid-2000s. IMPS in 2010, UPI in 2016. It's been > 10 years since the latest instrument launch. Enough time for "long term" impacts to show up.
If anything, the impact has been overwhelmingly positive.
crop_rotation 20 hours ago [-]
Just for my curiosity, why do you think "what NPCI is offering will end up negatively impacting the general population in the long run."
tecoholic 18 hours ago [-]
I would guess NPCI being a private body with transaction charges being borne by the Indian government is a net negative in the long run. It costs everyone. NEFT and RTGS on the other hand is RBI regulated with clear pricing and costs only those involved. The cost structure needs to change, but then, it won’t be possible. To pay 5 rupees for a chocolate with your phone and get even 0.5 added on top would make the consumers switch to cash almost immediately.
Founded in December 2008, the NPCI is a government organisation registered under Section 8 of the Companies Act 2013, established by the Reserve Bank of India and the Indian Banks' Association. The organisation is owned by a Government of India,[8] and has been promoted by the country's central bank, the Reserve Bank of India. The NPCI was incorporated in December 2008 and the Certificate of Commencement of Business was issued in April 2009. The authorised capital has been pegged at ₹3 billion (US$31 million) and paid-up capital is ₹1 billion (US$10 million).
Initially, there were ten promoter banks viz. State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC. In 2016, the shareholding was diluted to include 13 additional public sector banks, 15 additional private sector banks, 1 additional foreign bank, 10 multi-state co-operative banks and 7 regional rural banks. The Board consists of Biswamohan Mahapatra as the Non Executive Chairman, Nominees from the Reserve Bank of India and Nominees from ten core promoter banks.[9] Dilip Asbe is the current managing director and chief executive officer of the NPCI after A. P. Hota, who retired from the post on 10 August 2017.
blackoil 17 hours ago [-]
NPCI is a public sector company with partial ownership between 46 banks. Its costs is trivial compared to savings and efficiency it brings in overall system. Cash handling is very costly for entire chain. Printing by RBI, its logistics by banks and handling by vendors.
Apart from that it is formalization of informal economy, govt has better visibility, tax evasion is difficult and people outside financial services can now use it.
Also, like Rupay has charging for transactions abover a certain threshold of value like 10000 will cover some of the costs without reducing the incentive of system.
Think of vaccines, small cost for big savings elsewhere.
tecoholic 13 hours ago [-]
Fair enough. I am not knowledgeable enough to debate if it’s a net negative or positive. But “savings and efficiency” also has a negative side where people have lost life savings and bank accounts emptied in a matter of minutes.
UPI doesn’t help much with tax evasion. The biggest vehicle of tax evasion is property and cash is still the king there. UPI has been a good quality of life improvement for everyone. However there’s been cost involved, that should be considered.
vinay_ys 11 hours ago [-]
All payment rails in India are RBI regulated directly or indirectly. NPCI is a non-profit section 8 company which is basically owned by the major PSU and private banks of India. And NPCI operates not just UPI, it also operates NEFT, IMPS, AEPS (aadhaar based payments), NETC (fastag), NFS (ATM network), Rupay debit/credit card network and BBPS (billpay). Only RTGS is operated by RBI directly.
Money serves its purpose while it's in motion. Increasing the velocity of money is good for economy. All the payment rails above do that 24/7/365 with lowest friction – by making all modes of payment possible and for free.
Digital payment rails is an order of magnitude cheaper (all inclusive) compared to cash rails. Accepting notes, counting, and depositing them, doing book-keeping and reconciling it against sales receipts, paying workers and vendors, avoiding leakage and theft etc – all cost time and money. For small merchants, it costs them time away from their business to handle cash.
UPI person-to-merchant (p2m) payments puts money instantly in their bank account. Their bank statements showing P2M deposits help them borrow for working capital at better interest rates.
Risk of theft with cash is much higher than digital theft from their bank accounts. RBI mandated 2FA, velocity checks, cooling-off periods, and awareness campaigns etc help people avoid scams.
W.r.t taxes, GST surveillance does catch merchants who accept high volume of P2M payments but aren't filing GST returns. Conversely, filing GST returns again helps with credit ratings and borrowing on better terms for working capital.
tecoholic 9 hours ago [-]
Thanks for the additional info. But I want to clarify one thing - I didn’t say anything about cash being a better choice. Both the comments to my response are making it out to be a cash vs digital thing. I am not sure why.
Next, NPCI is a PSU. So what? They are taking govt money to function aren’t they? The costs are borne by the banks which get allocations every budget to keep the system running. So whatever “profit” this PSU is making is literally just the government’s money paid through banks as transaction costs.
It helps with GST surveillance? Okay great. What about suitcases of cash that get passed around during land and property transactions?
2FA, velocity checks…etc., are things that came after the fact. For years no-one took responsibility for lost money. There was no redressal mechanism. ~Even today, does NCPI offers nothing as a redressal mechanism for scam transactions, it leaves it to the banks and individuals to sort it out. Which probably involves police complaints and follow up.~
Edit: I learnt that a redressal mechanism was finally introduced in 2025. So the above statement is invalid.
I genuinely have to ask, why is it hard to accept the shortcomings of the system and acknowledge the cost of running the system?
adjejmxbdjdn 8 hours ago [-]
You’ve literally stated that you are “not knowledgeable enough to debate if it’s a net negative or positive.” and then you’re wondering why someone who has a significant amount of knowledge about the system in question is finding it “hard to accept the shortcomings of the system and acknowledge the cost of running the system”.
The real question is that given that you don’t know anything about the system, why would you find it so hard to accept that maybe your claims are incorrect? Further, the other poster is not stating that there are no costs of running the system. They’re claiming, correctly, that the costs are far lower than alternative mechanisms.
This is not even hard to see. The cost of running NCPI is trivial compared to VISA/Mastercard’s network, not least because being a private company trying to maximize profits VISA/Mastercard overload their core network costs with the costs of running a massive concierge, gift card and loyalty points business, which is where their profits lie.
5 hours ago [-]
solarengineer 45 minutes ago [-]
If it is acknowledgement that you ( and others, I have spoken to various people on this topic) seek that UPI incurs costs, then here you go - I, a fellow tax-payer, acknowledge that the UPI must incur costs.
I find it acceptable to allocate tax money for a system that we as a country can use as an alternative to the Visa and MasterCard duopoly. With UPI as it is today, there are no margins added and passed to the customer, no transactions that are denied, no commissions cut. Payment is very fast, transactions can be proven. We are not at the mercy of any economic attack that the US would subject us to. Many are able to bank, are able to receive payments.
I find it not necessary that the UPI must show a profit. The direct and indirect benefits to the nation are far more important.
Also, "whataboutism" does not help. The suitcases and paintings and other such corruption examples that you cite require a separate investigation and redressal. One must not stop UPI or start charging the everyday person because some of the rich are corrupt. They will continue to exchange suitcases of cash for favours regardless of whether the UPI is chargable or if it even exists.
vinay_ys 15 hours ago [-]
AFAIK banks don't charge for NEFT transfers when initiated via their mobile app or Internet banking website. Fees apply only when you do it via their physical branch.
areoform 12 hours ago [-]
While I'm not an expert on the Indian system, I think fast, universal and free payments are a very desirable user experience, but they're not desirable in a financial system.
> Real-time payment rails that works 24/7 365 days a year from any bank to any bank (domestic, no exceptions) for free is truly a game-changer. Compare that to US payment rails which is slow and expensive. Apart from UPI, India has 3 more payment rails – NEFT (similar to ACH – batch settlement), IMPS (similar to UPI, instantaneous - but different user experience), RTGS (real-time, intermediated by the central bank RBI, but only for high-value transactions)
The financial industry and central banks have done themselves no favors with their opaqueness, but sadly this has led to a state where very few people understand the mechanics of the financial system.
The systems you named aren't alike. You are (understandably) mixing together several different networks and layers that are structurally different from one another.
In the United States, there's a mix of private and public institutions and networks. Anyone is free to start their own network – a necessary freedom. There are in fact several different networks such as the Fed's FedACH, and at the private level, the ACH Network (governed / semi run (???) by National Automated Clearing House Association (NACHA) in a confusing amalgamation of the Fed's FedACH network and The Clearing House's private Electronic Payments Network).
The Clearing House Payments Company™® also operates one of the world's largest private settlement systems, Clearing House Interbank Payments System, which includes American entities and non-American ones in the EU, China and other places as well.
From my somewhat limited knowledge of India, there is a lot of state interference and control over access to these systems and their creation; whereas in the US, while there are some regulations, any set of institutions are free to create their own private settlement systems and networks. Note – this is different from being free to transact with each other; this is the creation of private infrastructure that allows them to transact with one another at different levels of trust.
For example, from my limited reading just now - and to quote you – "IMPS (similar to UPI, instantaneous - but different user experience)" is kinda sorta a hybrid between institutional level agreements and consumer level agreements / networks. There's an important distinction here to draw.
Just because your bank knows my bank doesn't mean that my bank trusts you to honor your obligations to your bank and then (by extension) its obligation to itself and then to me. That's the lowest level of counter-party risk present in the system. And it's where the famous consumer networks like Visa, Mastercard etc. come in.
There is an important distinction to be made here, and it sort of highlights what someone I know stated as a systemic risk inherent to one network systems like India's — within these networks, the risk of fraud / failure of settlement from the end user to the institution is taken on by the entities running the networks... which in fact brings us neatly to something I realized while studying these systems, but haven't seen it written up elsewhere — (note, this is from an older comment, https://news.ycombinator.com/item?id=25951783 )
The question at the heart of the banking system is quite simple, if banks take capital from customers and use it to provide debt to others, then how much money should they keep on hand for their customers' withdrawals and transfers?
This question is hard to answer. As there is a conflict between what the bank does (i.e. provide debt), and how it is supposed to provide it (by taking savings etc.). Everything else, from central banks "offering cheap liquidity" is an add on. They are mechanisms that allow - for example, a bank to easily borrow this money so that they can cancel it out/repay it from transactions coming into their banks.
What makes it all borked is that you can't trust bankers with their grandmas. If there is a flaw, they will exploit it. Every major change has led to an exploit. E.g. In 1918, the American Government introduced the Leased Wire System that used the telegraphs and a network of 12 Reserves to allow banks to transact with each other across CONUS. It reduced the average time for cheques to be cashed in at banks across the country from 5.4 days in 1912 to just 2.4 days. Theoretically, this reduced the risk taken by banks when they transacted with unknown banks across the country, with the Government acting as the escrow. It catalysed innovation and led to an explosion of financial services across the young country.
The system was supposed to be foolproof by reducing the time "credit" was needed to make transactions. Essentially, until one bank sent the money and the other got it, they were operating on a system of credit. And they would "net" the books at the end of the day/week to physically transfer assets. FedWire (Leased Wire System) made everyone feel safe by sending notes of the transactions across great distances. But the netting still took time. All it took was one bank to misprice risk and fall behind on current obligations to other banks to cause the chain of dominos that led to hundreds shutting down in weeks and then thousands... which then led to the Great Depression.
Important people got together and made rule changes to fix the problem. But then they innovated again. The Federal Reserve started making Automatic Clearing Houses (ACHs) and Remote Check Processing Centres (RCPCs) to make settlement faster, starting in the 60s and precipitating in 1972. This made settlement faster therefore safer. And it led to great financial innovation. The magic of computers and innovation meant that people could use these same systems to transact across the world!
Until 1974, when the German lender Herstatt collapsed due to foreign exchange investments based in the Dollar, which caused the bank to fail to meet its settlement obligations...
That day, a number of banks had released payment of Deutsche Marks (DEM) to Herstatt in Frankfurt in exchange for US dollars (USD) that were to be delivered in New York. The bank was closed at 16:30 German time, which was 10:30 New York time. Because of time zone differences, Herstatt ceased operations between the times of the respective payments. The counterparty banks did not receive their USD payments
This is a simplified history. But the history of banking is the history of doing settlement while managing liquidity and counter-party risk.
---
> all are 24/7/365 and free
"Free" is a poor metric on which to judge a financial system. I would argue that it is an undesirable one. There is no such thing as free lunch. The more you understand these systems, the more you realize just how dangerous that "free" line is.
Cost in these systems is only partially about the "cost" of moving the digits. All of those dollars are there to mitigate / price in the risks inherent to the system. Hence, credit card transactions have a higher percentage per transaction than debit ones and so on up and down the chain.
Real-Time Gross Settlement systems, ACHs, consumer payment systems etc. change who, where and how that risk is managed. At the end, it might fundamentally be the same "money" going from one layer to another to another (kind of like a packet) but who takes the risk at every layer changes.
And that's also why they're paid through extensive testing over literally a century; people realized that a system that has capital shored up within it / paid up by its users is a system that can handle systemic risk. A system without that...
And that's a problem with purely state-based "free" systems like the Indian network that I haven't seen highlighted elsewhere is that counter-party risk isn't balanced between entities — it's taken on by the state. Sooner or later, there is going to be a cascade failure within this system unless something fundamental is changed.
----
whew - edited tone + grammar + spelling errors after posting!
repeek 23 hours ago [-]
22B in the month of June 2026, so 264B extrapolated annually.
vinay_ys 22 hours ago [-]
Yep. Here's the accurate Month-to-date stats published daily by the network operator NPCI https://x.com/NPCI_NPCI. If you want official stats across all banks, across all payment rails, look at the central bank (RBI)'s website.
A great lesson for system design job interviews - if this is a popular payment system in a country with 1.5 billion people, your theoretical system you're designing for a small company cargo culting Google interviews will not likely support millions or even tens of thousands of average TPS.
inigyou 19 hours ago [-]
Well, they are money-moving transactions which means each person only does them a few times per day. If your system's transactions are more like showing the weather on the home screen, it's plausible you could have orders of magnitude more traffic than a payment system.
AugustoCAS 9 hours ago [-]
To add - I agree that payments is great question for systems designs.
Merchants need to receive the money and being able to transact with it. Imagine the merchant receiving the payment is something like Amazon or Ebay (sorry, I don't know what similar large online retailers are in India).
With the above, the problem becomes harder. Imagine receiving 2-3k TPS just on one account during a black Friday or similar day.
Now your system has to perform fine for accounts that do 30 transactions an hour for a retail customer and 3k a second for a merchant.
jesuswasjew 23 hours ago [-]
Centralized, kyced, private money transaction network. Is this something good?
wqtz 5 hours ago [-]
It is practical. When mobile wallets was taking off a lot of people starting pitching "blockchain technogloy" in fintech and said decentralization needs to be the foundation for everything. The whole process largely become about technogical philosophical discussion about decentralization, p2p, intermediate crypto transactions, stablecoins etc. A lot of consulting firms made a shit ton of money while at the end of the government agencies and banks was scratching their head trying to find out how they "invested" millions without an iota of progress in terms of product development. The conclusion largely was fintech innovation should not be led with governments.
If you look at very large scale IT infrastructure engineering, a lot of times those technologies are developed and sold to governments by US or west EU government controled or influenced companies that does impose to some degree to the sovereignty aspect of a government.
So, with decentralization discussion most government lost a ton of money to consultants. They could wait for to buy off the shelf software that comes control risk. Or they could accept the risk and limitations and build a software that works now.
I think india made the right choice to build a system on framework that is proven and predicatable.
pixelatedindex 21 hours ago [-]
It’s extremely good, at least in terms of user experience and how practical it is. Adoption is massive and at small chai shops it makes transactions a breeze, allowing businesses to serve more volume. The downside is making it incredibly frustrating for foreigners to pay using this as it’s tied to your government ID that your bank has authorized.
fakedang 19 hours ago [-]
I mean it's not like foreigners are blocked from using cash at those stores. And if they prefer cards, it's not like the stores that used to accept them stopped accepting them.
pixelatedindex 30 minutes ago [-]
Funny story… I was on a trip to Europe (Poland) using my US credit card that didn’t have tap to pay or chip and pin (I believe it was swipe only) and the store literally did not have a way to accept payment and I had no cash on hand.
They were nice enough and gave the pastry for free because they tried everything to charge the card but it didn’t work. They were embarrassed about the whole thing and were just like… please leave.
satvikpendem 16 hours ago [-]
Most places will not have change so you need to carry exact cash change all the time. And many are indeed stopping using cards and switching to UPI as the fees are much less, unless they are particularly foreigner friendly, like a hotel in a tier 1 city.
ashkulz 15 hours ago [-]
In fact, card acceptance has gone _up_ in my experience. Unless you're using a very small shop which just has a QR code, most businesses now use a POS which supports a lot of payment methods including cards.
I agree that a lot of businesses now actively don't manage cash as they used to earlier... it's very difficult to get low-value notes as the central bank seems to be slowly reducing the supply by not printing as per demand.
devsda 14 hours ago [-]
> card acceptance has gone _up_ in my experience.
Yes acceptance may have gone up, but I think thats a side effect of normalizing digital transactions popularized by UPI.
tancop 20 hours ago [-]
way better than privately owned banks doing the same while extracting profits from users. better than todays crypto with terrible ux where its easy to lose all your money. more practical than cash (but that should still be an option).
worse than a system thats convenient and decentralized and anonymous at the same time, but we dont have one yet. maybe in 5 years when ethereum figures out native account abstraction, seamless scaling and monero level privacy.
Yes it is. It's not trying to be new money, it's your money that already works.
faust201 11 hours ago [-]
KYC and centralisation means govt will promise your money is there. These are essential for dev country or 3rd world. Even with so much kyc often there are fraud. This has minimised fraud.
If you are looking for RMS style freedom etc then look elsewhere. This is not Iceland or Nordic.
One another overlooked issue is India was the largest printer of currency. Until UPI etc modernisation - lots of torn currency - usually caused arguments/inconveniences among population. Also often shopkeepers or transport agencies did not return proper money change upon payment.
Irrespective of privacy, now it take few seconds to pay. Just works. Even without NFC. No worry about return change.
inigyou 7 hours ago [-]
We've seen basically every country in the world make promises and break them. Right now your money is there, but give it less than 10 years until someone is decided to be a terrorist based on their transaction pattern, and all of their money is taken away.
inigyou 19 hours ago [-]
That's how government money works. This is the best possible system for handling government money. If you want an alternative you could buy some bitcoin with it.
ChrisMarshallNY 22 hours ago [-]
I have heard nothing but good about it, from my Indian friends. They rave about it.
toomuchtodo 22 hours ago [-]
Yes, it is peak developed world financial infrastructure, ran as a utility under government direction.
NordStreamYacht 17 hours ago [-]
It's the CBDC that govts lust for.
inigyou 7 hours ago [-]
If CBDC means this, I have bad news for you about every other country.
fragmede 22 hours ago [-]
How is it KYCd yet also private?
globemaster99 21 hours ago [-]
It's the intention and use case. The government want to reduce the fund leakages and reduce corruption, directly transfer the money to citizens, reduce transaction costs. Hence it works.
The government does not track all the transactions. You need a police FIR, to review these transactions.
In short, Indian government does not track or they don't have the scaling to track. But they can do it, if there is any criminal complaint.
khriss 20 hours ago [-]
> In short, Indian government does not track or they don't have the scaling to track
This is completely wrong.
Not only can the Indian govt track each these transactions, it's actually written into law via the 'anti money laundering' bill (PMLA) and the income tax act. For a very high level overview, see https://www.bankbazaar.com/tax/tax-on-upi-transactions.html
From the article
'Can the Income Tax Department Track Your UPI Transactions?
Yes. With the integration of PAN, Aadhaar, and Know Your Customer (KYC) via all banking and fintech channels, all your UPI transactions can be tracked. If you think your small-value digital transfers won't be traced, you are mistaken. UPI payments are directly linked to your bank account, and bank records can be obtained by tax officers through scrutiny or reassessment.'
Specifically, no complaint or warrants are needed to enable access to UPI transaction records.
crop_rotation 20 hours ago [-]
Yeah globemaster99's point seems very naive.
20 hours ago [-]
cute_boi 17 hours ago [-]
> You need a police FIR, to review these transactions.
In India, if you even have a small power you can easily review any transactions...
blackoil 17 hours ago [-]
I think OP meant network is private. That also is wrong, it is semi govt.
rvz 18 hours ago [-]
> Is this something good?
All good for a central bank digital currency (CBDC) and for creating the digital rupee.
Horrible for your bank account.
0x1ceb00da 18 hours ago [-]
> Horrible for your bank account
Why? Are you saying that people spend much more because upi has made spending so easy?
23 hours ago [-]
nocoder 12 hours ago [-]
Question to op - Do QR based systems in other SEA countries like promptpay in Thailand also work on similar logic?
Also, great website and layout, very respectful of the reader. Clean and with zero distractions.
prtk25 10 hours ago [-]
Thanks for the kind feedback.
I am not very familiar with the PromptPay architecture, but a quick search reveals that the user-facing app for QR scanning is bank-owned, rather than a Third-Party Application Provider (TPAP) like Google Pay is for UPI. In the case of UPI, you can link multiple accounts from the same or different banks to a single TPAP.
Another potential difference is the interbank protocol implementation. For UPI, the messages involved in a transaction are asynchronous. When NPCI calls the remitter bank for a debit request (ReqPay message), the bank is only supposed to send back an acknowledgement message (Ack) in the same HTTP request. Once the processing is done, the bank's switch sends a response (RespPay message) to a callback endpoint at NPCI (which, in turn, returns an Ack to the remitter bank). A similar flow happens when NPCI sends a request to the beneficiary bank for credit.
freakynit 9 hours ago [-]
[dead]
Superbowl5889 6 hours ago [-]
Great Read ! Thank you for such detailed introduction to UPI, I'm lookingfor such articles for mastercard or VISA
sometimes_all 14 hours ago [-]
The content is good, but the crore/billion toggle is fantastic. A great addition, I hope it catches on in India-specific websites.
I just wish it had a tooltip because its purpose was not immediately clear (CR/BN is a bit cryptic).
OJFord 9 hours ago [-]
Ooh that's what that is - I thought it looked like a language toggle, but I couldn't work out the languages or in what language the abbreviations were (like HI/EN), and obviously it didn't have that effect. That is a nice idea.
prtk25 14 hours ago [-]
Thanks for the feedback! I will try to make it clearer.
codethief 16 hours ago [-]
Great article. I would love to see a similar article about how POS credit card / debit card payments work in the US/Europe, depending on whether you use the card's magnet stripe, chip or your phone (Apple Pau/Google Pay/…) to pay.
GZGavinZhao 21 hours ago [-]
How is this different from Alipay/WeChat Pay in China? Handling transactions of this volume is an amazing technological feat, kudos to the team! However, I don't think this mobile QR code paying system is anything novel. Alipay rose to popularity much earlier (I can't recall exact when, but it was already super popular in ~2010, and definitely ubiquitous by 2015).
bri3d 20 hours ago [-]
It’s a completely different backend model; as far as I know alipay works just like PayPal where transactions are fully “internal” - the buyer pays Ant Group and the seller cashes out at a later date.
UPI is a real inter-organization payment system more akin to credit card processing, where fund requests flow from the payer, through a payer processor, through a merchant processor, and finally to their end destination, and the actual reconciliation happens through a bank transfer system. It’s a much less centralized system.
zaptheimpaler 20 hours ago [-]
UPI is more like a routing/reconciliation layer like VISA that can work across any bank/wallet, and that core is run by a non-profit government org. It doesn't take custody of the funds and doesn't centralize the information into a private corporation. The fee is also minimal and flat-rate with no profit incentive, instead of paying a percentage of the entire countries transaction volume to some private company. I would guess that adds up to a huge amount of money saved overall.
repeekad 21 hours ago [-]
Much of the world doesn’t like having a single entity own and control the process end to end, it’s more efficient but there’s only one point of trust. Multiple institutions that have to check each other means you don’t have to trust a single entity with everything.
agnishom 17 hours ago [-]
The main difference is that the core API is public infrastructure (run by a government authority). The apps are run by different companies but the backbone is interoperable by design
dyauspitr 15 hours ago [-]
Alipay is the usual deal with a single company’s server and then they settle those later. Relatively basic compared to this.
teyc 8 hours ago [-]
What funds the UPI system? I assume that it’s cheaper than MC/Visa rails?
filleduchaos 7 hours ago [-]
It's an industry-owned initiative, i.e. all licensed banks, including the central/apex bank (pretty sure this is the Federal Reserve in American parlance?) are stakeholders. The funding comes almost entirely from these banks, and the transfers themselves are free (between personal/individual accounts, at least). I'm pretty sure the government partially reimburses the banks to soften the cost, so I suppose you could say it's also funded by government subsidy?
Some similar systems have transaction fees and run as for-profit organisations, but the fees are tiny compared to card transactions. For instance Nigeria's NIP has a maximum fee of ₦53.75 (roughly four cents), with most banks allowing you to transfer up to ₦5 million in a single transaction.
larodi 10 hours ago [-]
I can sense Claude behind all interactive graphics here, yet it apparently does great job to further make the point and interestingly TimesOfIndia is a major media outlet.
I also thought it was from Times of India initially
gowthamgts12 9 hours ago [-]
it's nowhere related to TimesOfIndia. It's `Time Series of India`.
from their footer:
> Time Series of India is an open-source project charting India's public data. All data belongs to the publishing agencies; charts and text may be cited with attribution.
20 hours ago [-]
adithyassekhar 16 hours ago [-]
I like the article but “ Bricolage Grotesque” and the claude background colour just puts me off.
dyauspitr 15 hours ago [-]
Why? It looks pleasant.
adithyassekhar 13 hours ago [-]
It does. But I’ve seen it so many times now.
mndgs 10 hours ago [-]
So? Read the article, and? Some pretty basic payment flows.. Nothing about settlements, payment card messaging flow (you see a simplified logic in the article), nothing about other payment rails.. Come on.
filleduchaos 10 hours ago [-]
Maybe you just don't know what you're looking at? UPI is an inter-bank system, why on earth would you expect an article on it to contain a payment card messaging flow discussion?
bsa33 3 hours ago [-]
I am Indian. I dont use UPI. Never have. Has not effected my life in any way.
colesantiago 16 hours ago [-]
UPI is fantastic software and the pride of great software engineering from India.
Excellent engineering.
I only wish more countries would implement something like UPI in other countries and get rid of inferior and broken solutions like crypto.
Giving your credit card to your child / friend / spouse / subordinate, so that they can buy something with your money, is a lot more risky than giving them an OTP, valid for a single transaction, which you have to approve in your app anyway.
Poland's Blik is based on 6-digit codes, which makes this feature even more useful, as you can E.G. dictate that code over the phone to a trusted acquaintance at the ATM.
For context: it's basically a recurring payment but you open the Autopay section in Google pay or whichever app and it shows you all your subscriptions right there (which is a major +), the transaction history, and cancellation happens in the UPI app itself I don't have to faff around in the SaaS and deal with potentially some dark patterns.
I think every country goes through this and then goes back to cash, but at different rates.
However, the Government is in a fix. Almost the complete stack is subsidized by the Government. This led to an explosive adoption growth for merchants as there is no MDR and payers for ease of transaction as they don't need to carry hard currency anymore. This has enabled the Government gaining complete insights into spending and earning patterns. Withdrawing this massive subsidy will again lead to people using cash. So in order to prevent "terrorism" they will subsidize for the foreseeable future.
But it is a country with extremely illiberal capital controls and a history of questionable enforcement due to perceived corruption.
It’s such a good payment system it’s overcome these concerns in large part, but they are reasonable concerns to have.
As GP says, you could _never_ get the older generation to use a credit card even when they had the means to do so. But they took to UPI just fine, and many now prefer it over cash.
Also, credit card issuance and acceptance in India is growing quite a bit right now, despite (because?) of UPI.
Network rules disallowing customer surcharges have actually become prohibited by law in quite a few places.
Visa and Mastercard payment rails are somewhat disjoint, even for large Indian companies. As a foreigner, there's always been a huge acceptance gap vs many other countries when you want to use a card.
Yes India got credit cards but it was not widespread and people did not use it as a daily thing since most stores/outlets did not have the card swiping system. UPI solved this problem very well since you just need a QR code and a valid bank account and no transaction charges making it perfect for day to day spending.
We got digital payments and smartphones together. But in the US for example, credit cards came much earlier and were able to capitalize very well since there wasn't a lot of the technology at that time which we take for granted today.
People up until one-two generations ago completely rejected the use case for credit cards for payment, since they just did not want to swallow the premise of using credit as a payment instrument. If that doesn't happen, credit cards do not take off (just as what you are saying). The problem wasn't as much as systems were not available; systems were available but people did not want it. Merchants swallow the cost if the demand comes (this is what is happening right now; credit cards are becoming mainstream despite UPI being there, because younger generation loves using them, and more merchants than before are allowing credit cards on UPI even though they can reject them, because people want to use credit on UPI as well). People at that time just did not want to use credit, so merchants had no incentive to bear costs. Kali Mody brought Diners Club to India in 1961 (my father has fond memories of that instrument). CBI introduced the first bank-issued credit card in the eighties. The system was _always_ there. People just didn't feel they wanted to use it.
People also forget that UPI is not just for consumer-to-merchant. It's also a P2P system, which credit cards definitely aren't.
You make a system that people want, people will use. People used UPI.
You seem to either not have an understanding of ground reality (if your father was using Diners Club in the 60s, he was in the elite). But the system "being" there vrs the environment of the system actually being useful are different things. People did not reject credit cards at that time due to idealogical reasons, they rejected it because there was no point for them.
By the time, we stepped up in commerce, digital payments like UPI were easily available. This is why most people say we skipped the credit card phase and went straight to digital payments. Nobody is saying India did not have credit cards but look at adoption rates and the economic reality of India in the 60s to 90s and you will see many factors that prevented this that are not realated to the technolgy or idealogy at all.
Well, I wouldn't say "elite", but well off (at that time), but that still doesn't mean that card networks couldn't have made themselves useful if they/the government wanted to. Poverty is not a gating mechanism. Plenty of poor people in the US use credit cards - they practically fund the rewards system since they cannot pay on time - and I seem to remember that the first Americards were figuratively dropped from the skies, regardless of the holder's income or debt levels, which was then used to coax merchants into accepting them. Such sort of "growth" tactics would not have had an effect here since neither the government nor RBI would allow it, nor would the people take too kindly to it. And let's not disparage people for not understanding ground reality. What I'm saying still has basis in fact, just possibly not the facts you seem to care about. The point about people not wanting to use credit cards still stands. Just talk to someone > 60 years old and you'll get the drift. Many wouldn't touch a revolving credit feature here even if it was forcefully handed to them and they could easily use it. As much a fan my dad was of Diners Club, he still told me to not touch a credit card until I had at least twice as much income as expenses.
I don't disagree with you entirely, and your points are not the reason I talk about the sixties and eighties; I talk about them because many people seem to think that India did not have the systems there at all, and that India did not have enough well-off people in the past at all, or that India did not have any sort of knowhow or capability to introduce systems like credit cards (and make it work for quite a bit of the population) at all. That part is incorrect. The systems were there, they just failed for the "hundreds of millions" at that time while still working for the "few million", plus they still hung around enough to succeed now because clearly the potential was always there. Just because they didn't catch on quickly did not mean that they weren't there or were not useful to a subsection of the population. You cannot just go "straight to the digital payments phase" without acknowledging that things were there and what their trajectories were. People seem to forget that relative small scale "of solving problems" for India in terms of adoption is large-scale for other countries. A single-digit percentage acceptance in this country can swallow many countries' populations, poor or otherwise.
Are there any reason why we can't have a global UPI system? Open Source with each Government running their own instances.
[1] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2224505&re... [2] https://www.nipl.com/how-it-works/frequently-asked-questions...
I worked on scaling UPI a few years ago. Real-time Payments is vastly more complex as it is much more distributed - each transaction involves the two banks holding funds, two end-user apps (and their banks), and the network (npci) – for the payment to complete end to end, multiple message exchanges need to happen between these parties while the user at both ends are waiting. So, if you measure the scale in messages/sec it would 10-25x higher.
Real-time payment rails that works 24/7 365 days a year from any bank to any bank (domestic, no exceptions) for free is truly a game-changer. Compare that to US payment rails which is slow and expensive. Apart from UPI, India has 3 more payment rails – NEFT (similar to ACH – batch settlement), IMPS (similar to UPI, instantaneous - but different user experience), RTGS (real-time, intermediated by the central bank RBI, but only for high-value transactions) – all are 24/7/365 and free. Then, there's credit card rails – apart from Visa and Mastercard, India also has RuPay which has much lower interchange rate.
Also RTGS is the only ISO 20022 complaint payment rail (back when it wasn't globally very common) - something that needs to be appreciated more.
People need to realise what NPCI offers is vastly different from what RBI offers. In my opinion what NPCI is offering will end up negatively impacting the general population in the long run.
NEFT and RTGS were introduced in the mid-2000s. IMPS in 2010, UPI in 2016. It's been > 10 years since the latest instrument launch. Enough time for "long term" impacts to show up.
If anything, the impact has been overwhelmingly positive.
Founded in December 2008, the NPCI is a government organisation registered under Section 8 of the Companies Act 2013, established by the Reserve Bank of India and the Indian Banks' Association. The organisation is owned by a Government of India,[8] and has been promoted by the country's central bank, the Reserve Bank of India. The NPCI was incorporated in December 2008 and the Certificate of Commencement of Business was issued in April 2009. The authorised capital has been pegged at ₹3 billion (US$31 million) and paid-up capital is ₹1 billion (US$10 million).
Initially, there were ten promoter banks viz. State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC. In 2016, the shareholding was diluted to include 13 additional public sector banks, 15 additional private sector banks, 1 additional foreign bank, 10 multi-state co-operative banks and 7 regional rural banks. The Board consists of Biswamohan Mahapatra as the Non Executive Chairman, Nominees from the Reserve Bank of India and Nominees from ten core promoter banks.[9] Dilip Asbe is the current managing director and chief executive officer of the NPCI after A. P. Hota, who retired from the post on 10 August 2017.
Apart from that it is formalization of informal economy, govt has better visibility, tax evasion is difficult and people outside financial services can now use it.
Also, like Rupay has charging for transactions abover a certain threshold of value like 10000 will cover some of the costs without reducing the incentive of system.
Think of vaccines, small cost for big savings elsewhere.
UPI doesn’t help much with tax evasion. The biggest vehicle of tax evasion is property and cash is still the king there. UPI has been a good quality of life improvement for everyone. However there’s been cost involved, that should be considered.
Money serves its purpose while it's in motion. Increasing the velocity of money is good for economy. All the payment rails above do that 24/7/365 with lowest friction – by making all modes of payment possible and for free.
Digital payment rails is an order of magnitude cheaper (all inclusive) compared to cash rails. Accepting notes, counting, and depositing them, doing book-keeping and reconciling it against sales receipts, paying workers and vendors, avoiding leakage and theft etc – all cost time and money. For small merchants, it costs them time away from their business to handle cash.
UPI person-to-merchant (p2m) payments puts money instantly in their bank account. Their bank statements showing P2M deposits help them borrow for working capital at better interest rates.
Risk of theft with cash is much higher than digital theft from their bank accounts. RBI mandated 2FA, velocity checks, cooling-off periods, and awareness campaigns etc help people avoid scams.
W.r.t taxes, GST surveillance does catch merchants who accept high volume of P2M payments but aren't filing GST returns. Conversely, filing GST returns again helps with credit ratings and borrowing on better terms for working capital.
Next, NPCI is a PSU. So what? They are taking govt money to function aren’t they? The costs are borne by the banks which get allocations every budget to keep the system running. So whatever “profit” this PSU is making is literally just the government’s money paid through banks as transaction costs.
It helps with GST surveillance? Okay great. What about suitcases of cash that get passed around during land and property transactions?
2FA, velocity checks…etc., are things that came after the fact. For years no-one took responsibility for lost money. There was no redressal mechanism. ~Even today, does NCPI offers nothing as a redressal mechanism for scam transactions, it leaves it to the banks and individuals to sort it out. Which probably involves police complaints and follow up.~
Edit: I learnt that a redressal mechanism was finally introduced in 2025. So the above statement is invalid.
I genuinely have to ask, why is it hard to accept the shortcomings of the system and acknowledge the cost of running the system?
The real question is that given that you don’t know anything about the system, why would you find it so hard to accept that maybe your claims are incorrect? Further, the other poster is not stating that there are no costs of running the system. They’re claiming, correctly, that the costs are far lower than alternative mechanisms.
This is not even hard to see. The cost of running NCPI is trivial compared to VISA/Mastercard’s network, not least because being a private company trying to maximize profits VISA/Mastercard overload their core network costs with the costs of running a massive concierge, gift card and loyalty points business, which is where their profits lie.
I find it acceptable to allocate tax money for a system that we as a country can use as an alternative to the Visa and MasterCard duopoly. With UPI as it is today, there are no margins added and passed to the customer, no transactions that are denied, no commissions cut. Payment is very fast, transactions can be proven. We are not at the mercy of any economic attack that the US would subject us to. Many are able to bank, are able to receive payments.
I find it not necessary that the UPI must show a profit. The direct and indirect benefits to the nation are far more important.
Also, "whataboutism" does not help. The suitcases and paintings and other such corruption examples that you cite require a separate investigation and redressal. One must not stop UPI or start charging the everyday person because some of the rich are corrupt. They will continue to exchange suitcases of cash for favours regardless of whether the UPI is chargable or if it even exists.
The systems you named aren't alike. You are (understandably) mixing together several different networks and layers that are structurally different from one another.
In the United States, there's a mix of private and public institutions and networks. Anyone is free to start their own network – a necessary freedom. There are in fact several different networks such as the Fed's FedACH, and at the private level, the ACH Network (governed / semi run (???) by National Automated Clearing House Association (NACHA) in a confusing amalgamation of the Fed's FedACH network and The Clearing House's private Electronic Payments Network).
The Clearing House Payments Company™® also operates one of the world's largest private settlement systems, Clearing House Interbank Payments System, which includes American entities and non-American ones in the EU, China and other places as well.
From my somewhat limited knowledge of India, there is a lot of state interference and control over access to these systems and their creation; whereas in the US, while there are some regulations, any set of institutions are free to create their own private settlement systems and networks. Note – this is different from being free to transact with each other; this is the creation of private infrastructure that allows them to transact with one another at different levels of trust.
For example, from my limited reading just now - and to quote you – "IMPS (similar to UPI, instantaneous - but different user experience)" is kinda sorta a hybrid between institutional level agreements and consumer level agreements / networks. There's an important distinction here to draw.
Just because your bank knows my bank doesn't mean that my bank trusts you to honor your obligations to your bank and then (by extension) its obligation to itself and then to me. That's the lowest level of counter-party risk present in the system. And it's where the famous consumer networks like Visa, Mastercard etc. come in.
There is an important distinction to be made here, and it sort of highlights what someone I know stated as a systemic risk inherent to one network systems like India's — within these networks, the risk of fraud / failure of settlement from the end user to the institution is taken on by the entities running the networks... which in fact brings us neatly to something I realized while studying these systems, but haven't seen it written up elsewhere — (note, this is from an older comment, https://news.ycombinator.com/item?id=25951783 )
The question at the heart of the banking system is quite simple, if banks take capital from customers and use it to provide debt to others, then how much money should they keep on hand for their customers' withdrawals and transfers?
This question is hard to answer. As there is a conflict between what the bank does (i.e. provide debt), and how it is supposed to provide it (by taking savings etc.). Everything else, from central banks "offering cheap liquidity" is an add on. They are mechanisms that allow - for example, a bank to easily borrow this money so that they can cancel it out/repay it from transactions coming into their banks.
What makes it all borked is that you can't trust bankers with their grandmas. If there is a flaw, they will exploit it. Every major change has led to an exploit. E.g. In 1918, the American Government introduced the Leased Wire System that used the telegraphs and a network of 12 Reserves to allow banks to transact with each other across CONUS. It reduced the average time for cheques to be cashed in at banks across the country from 5.4 days in 1912 to just 2.4 days. Theoretically, this reduced the risk taken by banks when they transacted with unknown banks across the country, with the Government acting as the escrow. It catalysed innovation and led to an explosion of financial services across the young country.
The system was supposed to be foolproof by reducing the time "credit" was needed to make transactions. Essentially, until one bank sent the money and the other got it, they were operating on a system of credit. And they would "net" the books at the end of the day/week to physically transfer assets. FedWire (Leased Wire System) made everyone feel safe by sending notes of the transactions across great distances. But the netting still took time. All it took was one bank to misprice risk and fall behind on current obligations to other banks to cause the chain of dominos that led to hundreds shutting down in weeks and then thousands... which then led to the Great Depression.
Note - this is a highly simplified / subjective / one system view of a complicated sequence. more here https://www.stlouisfed.org/on-the-economy/2019/november/fina... / https://en.wikipedia.org/wiki/Panic_of_1930#Bank_failures
Important people got together and made rule changes to fix the problem. But then they innovated again. The Federal Reserve started making Automatic Clearing Houses (ACHs) and Remote Check Processing Centres (RCPCs) to make settlement faster, starting in the 60s and precipitating in 1972. This made settlement faster therefore safer. And it led to great financial innovation. The magic of computers and innovation meant that people could use these same systems to transact across the world!
Until 1974, when the German lender Herstatt collapsed due to foreign exchange investments based in the Dollar, which caused the bank to fail to meet its settlement obligations...
https://en.wikipedia.org/wiki/Settlement_risk#Herstatt_riskThis is a simplified history. But the history of banking is the history of doing settlement while managing liquidity and counter-party risk.
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"Free" is a poor metric on which to judge a financial system. I would argue that it is an undesirable one. There is no such thing as free lunch. The more you understand these systems, the more you realize just how dangerous that "free" line is.Cost in these systems is only partially about the "cost" of moving the digits. All of those dollars are there to mitigate / price in the risks inherent to the system. Hence, credit card transactions have a higher percentage per transaction than debit ones and so on up and down the chain.
Real-Time Gross Settlement systems, ACHs, consumer payment systems etc. change who, where and how that risk is managed. At the end, it might fundamentally be the same "money" going from one layer to another to another (kind of like a packet) but who takes the risk at every layer changes.
And that's also why they're paid through extensive testing over literally a century; people realized that a system that has capital shored up within it / paid up by its users is a system that can handle systemic risk. A system without that...
And that's a problem with purely state-based "free" systems like the Indian network that I haven't seen highlighted elsewhere is that counter-party risk isn't balanced between entities — it's taken on by the state. Sooner or later, there is going to be a cascade failure within this system unless something fundamental is changed.
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whew - edited tone + grammar + spelling errors after posting!
They put out a lot of useful stats here https://www.rbi.org.in/Scripts/Statistics.aspx
Daily payment settlement stats here: https://rbidocs.rbi.org.in/rdocs/content/docs/PSDDP04062020....
Merchants need to receive the money and being able to transact with it. Imagine the merchant receiving the payment is something like Amazon or Ebay (sorry, I don't know what similar large online retailers are in India).
With the above, the problem becomes harder. Imagine receiving 2-3k TPS just on one account during a black Friday or similar day.
Now your system has to perform fine for accounts that do 30 transactions an hour for a retail customer and 3k a second for a merchant.
If you look at very large scale IT infrastructure engineering, a lot of times those technologies are developed and sold to governments by US or west EU government controled or influenced companies that does impose to some degree to the sovereignty aspect of a government.
So, with decentralization discussion most government lost a ton of money to consultants. They could wait for to buy off the shelf software that comes control risk. Or they could accept the risk and limitations and build a software that works now.
I think india made the right choice to build a system on framework that is proven and predicatable.
They were nice enough and gave the pastry for free because they tried everything to charge the card but it didn’t work. They were embarrassed about the whole thing and were just like… please leave.
I agree that a lot of businesses now actively don't manage cash as they used to earlier... it's very difficult to get low-value notes as the central bank seems to be slowly reducing the supply by not printing as per demand.
Yes acceptance may have gone up, but I think thats a side effect of normalizing digital transactions popularized by UPI.
worse than a system thats convenient and decentralized and anonymous at the same time, but we dont have one yet. maybe in 5 years when ethereum figures out native account abstraction, seamless scaling and monero level privacy.
If you are looking for RMS style freedom etc then look elsewhere. This is not Iceland or Nordic.
One another overlooked issue is India was the largest printer of currency. Until UPI etc modernisation - lots of torn currency - usually caused arguments/inconveniences among population. Also often shopkeepers or transport agencies did not return proper money change upon payment.
Irrespective of privacy, now it take few seconds to pay. Just works. Even without NFC. No worry about return change.
The government does not track all the transactions. You need a police FIR, to review these transactions.
In short, Indian government does not track or they don't have the scaling to track. But they can do it, if there is any criminal complaint.
This is completely wrong.
Not only can the Indian govt track each these transactions, it's actually written into law via the 'anti money laundering' bill (PMLA) and the income tax act. For a very high level overview, see https://www.bankbazaar.com/tax/tax-on-upi-transactions.html
From the article
'Can the Income Tax Department Track Your UPI Transactions?
Yes. With the integration of PAN, Aadhaar, and Know Your Customer (KYC) via all banking and fintech channels, all your UPI transactions can be tracked. If you think your small-value digital transfers won't be traced, you are mistaken. UPI payments are directly linked to your bank account, and bank records can be obtained by tax officers through scrutiny or reassessment.'
Specifically, no complaint or warrants are needed to enable access to UPI transaction records.
In India, if you even have a small power you can easily review any transactions...
All good for a central bank digital currency (CBDC) and for creating the digital rupee.
Horrible for your bank account.
Why? Are you saying that people spend much more because upi has made spending so easy?
Also, great website and layout, very respectful of the reader. Clean and with zero distractions.
I am not very familiar with the PromptPay architecture, but a quick search reveals that the user-facing app for QR scanning is bank-owned, rather than a Third-Party Application Provider (TPAP) like Google Pay is for UPI. In the case of UPI, you can link multiple accounts from the same or different banks to a single TPAP.
Another potential difference is the interbank protocol implementation. For UPI, the messages involved in a transaction are asynchronous. When NPCI calls the remitter bank for a debit request (ReqPay message), the bank is only supposed to send back an acknowledgement message (Ack) in the same HTTP request. Once the processing is done, the bank's switch sends a response (RespPay message) to a callback endpoint at NPCI (which, in turn, returns an Ack to the remitter bank). A similar flow happens when NPCI sends a request to the beneficiary bank for credit.
I just wish it had a tooltip because its purpose was not immediately clear (CR/BN is a bit cryptic).
UPI is a real inter-organization payment system more akin to credit card processing, where fund requests flow from the payer, through a payer processor, through a merchant processor, and finally to their end destination, and the actual reconciliation happens through a bank transfer system. It’s a much less centralized system.
Some similar systems have transaction fees and run as for-profit organisations, but the fees are tiny compared to card transactions. For instance Nigeria's NIP has a maximum fee of ₦53.75 (roughly four cents), with most banks allowing you to transfer up to ₦5 million in a single transaction.
I also thought it was from Times of India initially
from their footer:
> Time Series of India is an open-source project charting India's public data. All data belongs to the publishing agencies; charts and text may be cited with attribution.
Excellent engineering.
I only wish more countries would implement something like UPI in other countries and get rid of inferior and broken solutions like crypto.
https://en.wikipedia.org/wiki/Instant_payment#Notable_instan...