India's UPI miracle faces its first real test: who pays for it?

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.

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.

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.

0.3-0.5% is still nowhere near the rates of visa and mastercard. Does UPI offer the same level of fraud protections or is it a free for all like Zelle is here in the states? Especially if they limit to > 2000 rupees.

Hopefully they allow foreigners some track to access UPI in the future.

...That may be about to change...

...The government has yet to decide the rate or exactly where it will apply...

...One option reportedly under discussion would target transactions above 2,000 rupees at larger merchants, leaving small businesses and low-value payments untouched. Transactions above that threshold account for only about 4% of merchant-payment volumes but roughly 67% of their value, according to brokerage firm Jefferies....

So discussions are at an early stage and an excited journalist has made a international article out of a national one. It's up to Indians to make clear what they are willing to tolerate in this consultation phase.

> the system is now available in some form for payments in 11 countries outside India.

I see this often cited, but in reality it's a farce. "UPI is international" the staunch defender says, so I rebut "Yes, in one place at the Eiffel Tower... everywhere else? The French have no idea what UPI is, and your bank will charge you stupid FX fees for card payments".

Meanwhile if I'm in India, people look at me weirdly for paying with UPI yet most won't take card payments outside of tourist areas or it will get declined because foreign cards are blocked - and if you try to pay cash suddenly nobody has any change, will refuse to take the 20 rupee note they gave you yesterday, or have concerns about whether the notes you literally just withdrew from an ATM are legitimate - meaning you can end up with notes that are defacto unspendable despite being perfectly legal tender and in acceptable condition.

And as a tourist... you want UPI? There are a few ways but they're byzantine, apps locked to the Indian App Store (for tourists?), in-person KYC upon landing, very low first-payment limit, topup/signup and idle fees that push the net fee % easily into the 5-10% range.

Lets look at a perfect example... you pre-KYC on an app ahead of your trip on the one app that allows remote KYC, but you can't load money onto - first you must provide your visa, but the eVisa doesn't count they want the actual visa stamped in your passport. You land, immediately after customs you submit the picture of your v […]

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.