First the banks were reluctant to be on UPI; then after realizing there's some name and fame involved, they welcomed UPI with open arms; now they want to stay away from the economically unviable UPI. Read the cost and conflicts of UPI @MorningContext.…
Ever since CBDT asked banks to refund the fee that they started charging their customers for UPI #payments (post MDR ban), banks has been complaining that consumers are abusing the system, thanks to cashbacks.
“Volume wise, UPI accounts for close to 48% of total digital payments volume, while value wise, it is just 2%. This only shows that a lot of Rs 510 kind of txn is happening may be just to get some cashback from UPI app – which is total misuse of the system, says bank official.
"The UPI volume is going significantly up, and the moment you make it free, there is a possibility that infrastructure will just collapse as it requires a huge cost to keep the UPI processing infrastructure up and running."
Other than manpower cost and full tech infra set-up, frequent NPCI circulars on updates/changes is another bug challenge, according to banks.
With no MDR in picture, acquiring banks still have to give switching fee to NPCI. "More the txn, more we have to pay. P2M as a space is a complete loss-making unit for banks today."
UPI gets more costly in case of txn failure. “In ecom txn, technical failures is biggest reason behind refunds. 20%-30% of all txn get refunded in India. Then there's disputes/chargebacks. 1% of all txn gets contested “Overall, at least 10% of all txn need some kind of relook."
With zero MDR, the acquiring fee has been taken away from the system. The way UPI is growing, the only fear is if UPI overtakes some of the payment modes for these merchant aggregators and banks, then there won’t be any revenue left in the system."
With current CBDT notification, it is clear that zeroMDR is not going anywhere anytime soon. So, what the industry has started seeing is revolt. First started with Kotak, only time will tell who's next.
Read the story for more details. Also,August 2020 UPI txn nos. in the story.

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More from @artijourno

28 May
This story is about Minance and its founder Anurag Bhatia - and all it was doing in the name of a fintech startup.
Few more tidbits 👇…
Minance did not have an IA licence until Feb 2019. "But, Anurag used to tell investment managers that if somebody asks, tell them we have the licence," an employee said.
By 2018 end, Minance was "close to a 40-member team and new systems being bought, new salespersons joining got brand new MacBook Pro and investment managers got MacBook Air." In 2019 Jan, moved to a new office space close to Rs 3 lakh monthly rental from Rs 1 lakh/rental.
Read 8 tweets
24 Jan
Since #zeroMDR is the talk of the town now, here are some thoughts on how these decisions are impacting NPCI:
- IBA has asked NPCI to scrap switching fees. The argument seems fair because if banks/fintech cos are not earning anything, they would definitely mind paying any fee to NPCI or any entity
- In the name of promotion, the govt is actually killing UPI, Rupay. UPI no longer needs promotion. A case in point: Razorpay's PG biz saw UPI (as payment mode) contributing 38% to total txns as compared to Debit/Credit Cards (46%) in 2019. In 2020, UPI will overtake cards
Read 11 tweets

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