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The Almighty Buck

The Country With the Most DIgital Payments: India (economist.com) 45

Posted by EditorDavid from the moving-money dept.
India's government gave nearly early household a bank account offering app-based digital money transfers, reports the Economist. But that's just the beginning: Take a walk on Mumbai's Juhu beach and little has changed in five years — except for the QR codes adorning every food stall. Go to São Paulo in Brazil, Beijing in China, or many other cities across the emerging world and you find something similar. "Most people only want to use UPI," says Govind, a seaside-snack vendor at Juhu, referring to India's fast-growing payments network. The Unified Payments Interface (UPI) is a platform that allows free and fast account-to-account transfers using fintech apps such as PhonePe or Google Pay. Unlike Alipay in China, it is open, so users are not locked into a single company and can take their financial history to competitors, notes Praveena Rai, the chief operating officer of the National Payments Corporation of India (NpCI), which manages the platform. And it is facilitated by QR codes or easy-to-remember virtual IDs.

UPI is drawing attention from across the world. "Look at what India has accomplished with the UPI, Aadhaar and the payments stack," Sundar Pichai, Google's CEO, has marvelled. Overall, it processed over $1trn in transactions in 2022, equivalent to a third of India's GDP. It was bolstered by the government's surprise "demonetisation" of 2016, when multiple high-denomination banknotes were discontinued. UPI also benefited when covid left consumers scared of cash. It has grown from around 17% of 31bn digital transactions in 2019 to 52% of 88.4bn transactions by 2022. "India leads the world in real-time digital payments by clocking almost 40% of all such transactions," Narendra Modi, the prime minister, has boasted.

The Indian model is inspiring others. Brazil's Pix, which facilitates bank-to-bank payments with a small fee, was launched in November 2020. It now accounts for some 30% of Brazil's electronic payments (credit and debit cards take up around 20% each). Such open instant-payment systems are an alternative both to the bank/card model in the rich world and to the closed fintech one in China... The hope is that UPI and similar systems might now let some poorer countries leapfrog the West... Mr Nilekani hopes UPI will eventually be used everywhere. "If I go to Lulu in Dubai or Harrods in London, I should be able to make a payment with UPI." That would surely create new competition for the bank/card behemoths in the West.
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The Country With the Most DIgital Payments: India More

The Country With the Most DIgital Payments: India

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  • EMVCo's monopoly needs to be broken (Score:3)

    by Rosco P. Coltrane ( 209368 ) on Sunday May 21, 2023 @04:05AM (#63539113)

    That would surely create new competition for the bank/card behemoths in the West.

    More importantly, it would loosen Mastercard / Visa / Amex's grip on the payment industry, and particularly their ability to deny people and organizations they don't like the ability to make or receive payments, as they demonstrated time and time again with porn providers, Wikileaks, etc. The same holds true for Paypal incidentally.

    • The various levels of government are influencing this as well. I don't know if it went through but there were threats of holding up payment processing by private companies and/or government regulators when dealing with firearms, marijuana, and so much else. It wasn't just the credit card companies. I know the credit card companies at least tried to deny services to people they had some political or philosophical problem with, but it didn't stop there.

      There was a deal with states that dealt only in cash f

    • Re: (Score:2)

      by DrXym ( 126579 )

      The likes of Paypal, Apple Pay, Google Wallet et al sit on top of these payment processors, exacting their own fees.

      Anyway there is absolutely no way that UPI or other domestic payment system is just going to be implemented outside of its territory. A shop in the UK (for example) isn't going to take payment from UPI from unless the app gives the user a virtual Mastercard or something. I don't see that ever changing ever.

    • deny people and organizations they don't like the ability to make or receive payments, as they demonstrated time and time again with porn providers

      You pay for porn providers? You must be new to the internet.

  • It is quite annoying to see links to articles and be greeted with an offer to pay to read the content. I can find free news in lots of places. If the news is big enough then someone will put it somewhere that I don't have to pay to see it. Well, the content is rarely free in the strictest sense as I'd have to pay in my time to see the adverts.

    With that rant out of the way I'll get to a point on topic...

    India is a nation with a lot of people, so many people that even an moderately popular trend will have

  • It is instant money transfer with *no fees*. Small shops will give you the same discount as if you pay with cash (around 5% or the credit card fee). The system is really handy, as you can associate your phone number or email to your PIX so it serves as a handle/alias when you receive money. You can also generate a random key to disclose less data with the sender. The challenge has been educate the population and make the system safe against scammers and regular muggers. It is a lot easier for scammers to

  • It is all about tax collection (Score:5, Interesting)

    by ukoda ( 537183 ) on Sunday May 21, 2023 @05:16AM (#63539169) Homepage
    Governments love this because it creates a record of every single little transaction, making tax assessment easy. Countries like China and India have a long tradition of doing cash transactions off the books so little tax is collected from small businesses. This closes that loop hole. In the west most people have been paying thru banks for a long time, so under the table transactions are a small scale and lost taxes were less. These new systems allows these countries to catch up on tax collection rates.

    • Re:It is all about tax collection (Score:4, Insightful)

      by 140Mandak262Jamuna ( 970587 ) on Sunday May 21, 2023 @09:30AM (#63539485) Journal
      You are talking as if taxes are a bad thing. Taxes are the price we pay for a civilized society. Taxes dodging must be prevented. Tax avoidance should be clear and transparent. Level of taxation, where taxes are spent, etc are open for debate. But blind opposition to all taxes is bad for the society.

      People of India support government plugging the tax evasion and tax dodging. Their main complaint is corporations, small business etc engage in rampant tax evasion, but the middle class salaried class is taxed strictly.

      Digital transactions help tamp down on the purchasing power of black money. Black money is life blood of corruption. Reducing its purchasing power is a primary requirement to reduce corruption.

      In the west a million dollars in a brief case is not as valuable, as spendable, as a million dollars in the bank. It is not the case in India. Lots of big denomination transactions happen on cash. Restricting the ability of laundering black money through retail businesses is a very good thing for India.

      • Re: (Score:2)

        by ukoda ( 537183 )
        Actually my post has no options about tax, just about the real motivation for government promotion of these systems. I would basically agree with everything you say. I would add if want rich people and corporations to pay more taxes you should stop trying to increase the rate you tax them at, and instead simplify the tax system so there is less options to avoid taxes.

      • Yeah, I was surprised once when I was in India and was just following someone who was in the middle of buying some property (land). Followed them around just to get some insight and realised that the seller was requesting payment in cash.

        The deal involved stacks of cash being given in one of those cloth bags. Something like 3,4million rupees (I think it's called 30-40 lakhs in India). I think biggest note denomination was 500 rupee? The buyer had to inform his bank one day prior to drawing the cash, then dr

        • The corruption in Indian land deals is incredible.

          To discourage under declaring the value, the government has the option to pay the declared value to the seller and take over the land and sell it in auction.

          Did it reduce under valuing assets? nah, it just made the powerful sub-registrar (of deeds) even more powerful and demand higher bribes ...

    • Fair tax assessment and making bribery more difficult are the stated objectives of UPI combined with demonetization. What I am most impressed with and what should scare Visa/Mastercard/Amex are how small the transaction fees are in UPI. IN US dollar terms, the fees are fractions of a penny up to a cap at 7 cents for large purchases.

      • Re: (Score:2)

        by ukoda ( 537183 )
        Yes, a key difference here is Visa/Mastercard/Amex exist purely to make money, a lot of it. These new payment systems are more about tracking money flow, with any income being a side effect that allows the operator to make a small profit, relative to the number of users.

        To use the Chinese one I had to provide the government, via my Chinese bank, I whole lot of proof of who I am. A few months later it stopped working until I did that process again. As a non-resident of China it was a huge hassle for a

    • Re: (Score:2)

      by trawg ( 308495 )

      This was indeed one of the goals of India's banknote demonetisation [wikipedia.org] which started in 2016. There were lots of skeptics at the time but it sounds like it might be panning out!

    • Re: (Score:1)

      by ap7 ( 963070 )

      It is not the transactions that the govt is looking for. It is the formalization of the informal economy that till a few years ago entirely dealt only in cash. A formalized economy does wonders for businesses, even if they have to pay taxes. They get access to formal (and cheaper) credit, they get access to govt support for expansion, a future safety net of some kind.

  • Here in The Netherlands (and the Euro countries in general) all bank accounts have a standardised format and are also unique.
    It is very easy and dirt-cheap to transfer money from your account to any other, even to accounts in countries without Euro like say Denmark.
    In The Netherlands there is since 2005 also the iDeal system making it even easier to transfer, it is free for the consumer, the retailer has to pay a small fee per transaction. iDeal is now going to be expanded into other countries through the

    • Re: (Score:2)

      by vyvepe ( 809573 )

      The question is how interesting iDEAL will be when all SEPA banks will joint SEPA Instant Transfer eventually. Especially, considering some uptime complains about iDEAL (at least on wiki). Well, SEPA is quite quick even now - the transactions are finished in 24 hours at worst.

      https://www.ecb.europa.eu/paym... [europa.eu]

      • iDeal has just been bought by a European initiative so it's likely to be rolled out across more EU countries relatively soon: https://ecommercenews.eu/ideal... [ecommercenews.eu] The value of iDeal isn't comparable to SEPA since SEPA does not do any integrations into software stacks AFAIK, correct me if I'm wrong but it seems you'd still need a payment processor.

        • Re: (Score:2)

          by vyvepe ( 809573 )

          SEPA Instant Credit Transfer is just like a common SEPA transfer in my internet banking. One just needs to check "Instant transfer" checkbox). Otherwise it is the same. Instant transfer is settled immediately and not in 24 hours like common SEPA. I do not think you need any payment processor. ECB settles the instant transfers between banks.

          I'm just curious how Instant Transfer will compete with Credit/Debit cards and iDEAL. Well, Credit/Debit cards have an advantage that the payer does not need a mobile ph

  • This is India. Who is counting the cash payments that these UPI payments are being compared with?
  • Of course UPI requires a smartphone to make payments, India has a relatively low smartphone ownership compared to the west with less than 25% of the Indian population owning an Android phone or iPhone, its hard to beleive that there are more digital payments in India than any other developed Western country.

    • Re: (Score:2)

      by ac22 ( 7754550 )

      That figure seems very low. This source gives a figure of 750 million smartphone users in India:

      https://www.fortuneindia.com/t... [fortuneindia.com]

      Most western people I know still use credit/debit cards rather than smartphones to make payments.

      • Yes and 5g being rolled out as well, that 25% ownership came from a post in 2019, where a further 25% was attributed to a 'non smartphone' owner, maybe they were referring to Kaios. With a population of around 1.4 billion, India is certainly an emerging market for this sort of technology, I just hope that it doesnt end up being used for scamming.
  • The Visa/Mastercard duopoly is skimming off 2% transaction fees. The debit card with 0.25$ fixed transaction fees was killed and hampered by them.

    India rightly believes a financial transactions infrastructure is a public utility, like highways or sewer system. Paid by taxpayers. It directly connects bank account to bank account, cutting out the middle man. It is expanding to Singapore. It has the potential to expand to entire east Asia, given the size of India, its proven ability to handle billions of mic

  • People in third-world countries put all of their financial transactions inder control of corporate power. And that's a good thing?

  • Back in 2010, India was the test market for Nokia Money. It did well, but was shut down in 2012. (Man, was there ever a shitter CEO than Stephen Elop?)

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