UPI losing ground battling foreign players
When Nandan Nilekani, architect of India’s citizen identity programme, put together a team of developers to work on digital payments in the country, the code name given to one of the key projects was ‘Panga’.
This roughly translates into “messing with someone” in Hindi. Apt, since the unofficial goal of the programme was to beat global giants such as MasterCard and Visa, breaking their dominance in payments.
What Nilekani’s team built has laid the foundations of Unified Payments Interface (UPI), a platform used by millions of people to send and receive money.
However, because of recent events, people are questioning if UPI has delivered on its promise of busting monopolies or aided in building new ones.
Vijay Shekhar Sharma, founder of India’s largest digital payments company, Paytm, in a series of tweets and interviews, has voiced dissatisfaction at the way WhatsApp, an instant messaging app owned by Facebook, had implemented digital payments through UPI. Sharma alleged WhatsApp was able to browbeat National Payments Corporation of India (NPCI), the body which runs UPI, into giving it favourable treatment.
“It is not about being protectionist. Everyone should be allowed to play the field but no one should armtwist and tweak rules to suit their designs. I have always maintained WhatsApp is a major security risk to India. Just like any other player, they should be allowed to operate in the country. However, they need to follow the rules,” Sharma told Business Standard in a recent interview.
It’s not Sharma alone. There are murmurs in the industry that the hope of UPI acting as a weapon to counter the control of digital payments by foreign entities, have been belied.
“The comments of Sharma have some merit. The intention of the government in launching BHIM (a UPI app built by NPCI) was to develop indigenous solutions and for indigenous companies to have mastery over the payments landscape,” said A P Hota, former chief executive officer and managing director, NPCI.
“Unfortunately, the Reserve Bank of India developed cold feet on this, citing reasons that NPCI (the clearing house) should stay away from solutions that interface with customers directly. Such a purist approach to regulation helped Google and WhatsApp,” added Hota, who had worked with RBI before joining NPCI.
A member of iSPIRT, who spoke off the record, recalled a meeting between heads of the organisation and Sharma in early 2016 to try and get him to support UPI. Sharma was told the open payment architecture would probably hurt Paytm, the largest digital payment start-up, the most since there would be no need for people to load money into digital wallets.
Sharma contested that, saying UPI would help Paytm since it would make it easier for people to load money into their digital wallets. With him on their side, iSPIRT and NPCI launched the UPI platform in April and after several delays, the first apps built on the platform began hitting Google Play Store by August that year. A little over a year and a half later, Google launched its own payment app for India, Tez, built on the UPI platform.
Hota said NPCI should be allowed to exert control over the digital payments ecosystem in India, rather than only act as a developer of infrastructure for Indian companies. He isn’t alone in believing Indian firms should receive preferential treatment over foreign counterparts.
Emails to RBI and Nilekani did not get response. Nor were phone calls to members of iSPIRT, the group largely behind the development of ‘India Stack’, of which UPI is part, answered.
Lalitesh Katragadda, a developer of ‘ India Stack’ and a recently appointed member of a committee under the ministry of electronics and information technology, paints a different picture as to why the UPI was built as a replacement for MasterCard and Visa. “It became apparent that Visa and MasterCard charges were too high and not designed for onerupee, three-rupee, and five-rupee kinds of transactions.”
The idea behind UPI was to create a cashless society, Katragadda added. However, he agreed with Hota that India should ring-fence its economy from foreign companies.
All large digital payment companies, like all large internet companies in India, are either multinationals or local firms that have accepted huge investments from foreign entities. Some say what lies behind Sharma’s anger is a Chinese firm’s attempt to deter the entry of an innovative rival from the US with deep pockets.
“I don’t think UPI has favoured any multinational. What has happened is that the government is yet to make laws to protect our own companies,” Katragadda added.