How a quaint country adopts its national idols. The statue of freedom donated by France once symbolized the freedom and civil rights of American immigration. China is intoxicated by the mystery of the Communist Party of China inherited from the quing dynasty. India – long regarded as a land of elephant and snake charmers – India had transitioned to digital identity when Aadhaar was introduced as a unique identifier in 2010.
The digital payment stack built on this single achievement now has a unified payment interface (UPI), which promises instant payments, licensing and settlements since its launch in April 2016. Speaking during this period, Tech Guru Nandan Nilekani announced that “UPI will change the payment scenario for payments in the country”, so it is also so. In 2023-24, UPI transactions (22.3 billion) accounted for 70% of retail credit transactions, with a quantity of 12%.
The unique proposition in UPI is the ability to transfer funds and get payments from your phone, including a unique identity of similar emails generated by a QR code, phone number or bank holding an account, becoming a premium version of the Instant Payment Service (IMP) launched by NCPI in 2010. In 2010, NCPI launched an advanced version of an account. The Satementof Setterention of Inderagation of Setterention is particularly attractive to the small Kitty Hawks and the little street grocers in India. They no longer stock small value notes to resolve cash payments without the exact amount of cash payments. For customers, it’s easier to record spending and security than carrying cash – although hanging on your phone now remains a worry on a crowded market or street.
National Payment Corporation of India (NPCI) manages the UPI platform. This is a non-profit company under Section 8 of the Company Act 2013. The Reserve Bank of India is the regulator of all payments under the Payment and Reconciliation Systems Act 2007. NPCI holds banks and financial institutions, thus approximates the holding model of Swift, and thus in Bank International Worlding Investments and Belg Bellig Society-Belg Bellg Society-Anterg Society-Anterg Society-Anterg Society-Belg Bellg Society-a Company Society) – A cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative, a cooperative as a member. The Board of Directors oversees Swift’s management and strategy to ensure global neutrality. Central banks from G-7 countries, including the European Central Bank and the Belgian National Bank, help to monitor business.
Since Swift is for international payments, NPCI is the main player in domestic payments. Unlike Swift, NPCI has a monopoly on digital payments in India. In 2020, the Reserve Bank of India began the process of creating competition and enhancing innovation through a new Umbrella owner authorization (a nonprofit or privately owned). Bidding was called in 2021. Like any well-managed monopoly, NCPI is financially respected. It has developed many new services such as credit cards – Rs 2012, Bhim 3.0 – 2016’s proprietary payment app, offering services in 15 Indian languages, enhanced currency management tools such as split fees, home models, spending analysis and reminders needed to operate in the low-speed internet sector. 34 third-party payment apps including Paytm, Google Pay and Phonepe are linked to UPI. 2023 – 24 revenue increased by 39%, costs increased by 47%, and profit margins (surplus generation) accounted for 39% of revenue. The revenue source is membership and compliance fees of member banks (up from 29 in 2016 to 661 in 2024, its partner banks process transactions through NCPI applications such as IMPS and Bharat Bill Pay System.
The expansion of its international market through its subsidiary NPCI International Payments Ltd (NPIL) will further diversify revenue streams.
Recently, the UPI network has suffered multiple power outages. In January 2022, the power outage lasted for more than three hours. So far, this has increased to three interruptions: due to NCPI’s switch failure with the bank, a half hour in March, another outage on April 2 and a five-hour outage on April 12 – explained by the bank’s transaction confirmation requests. In response, NCPI evaluated the number of such requests per bank to manage the demand aspect. It’s just that firefighters are like state-owned power companies shutting down power supplies to manage demand spikes on a hot day, rather than increasing reserve generation capacity to meet demand.
The common sense explanation is that management deterioration or investment in system upgrades lags behind the increase in business burden – the latter’s business growth in 2024 by 30%. However, NCPI enjoys the quasi-governmental status and monopoly power that are powerful tranquilisers. It is worth noting that in China, under the supervision of the People’s Bank of China, privately owned payment racks and WeChat (owned by Tencent) manage mobile payments, with transaction value of US$27 trillion in 2018, US$27 trillion in India and US$2.5 trillion in India in 2024.
NCPI should consider adopting Kaname Akamatsu’s “Flying Goose Development Model”. It should work with the regional or state “suitable and appropriate” private entities to evacuate it from the domestic digital payment market and focus on developing its international business, the basis for future currencies, finance and payments, complementing Prime Minister Narendra Modi’s overseas economic advocacy.
If the power of the dollar is humbled by recession and domestic policy uncertainty, alternative reserve currency arrangements need to be considered. The regional integrated payment system provides scope for substantial participation in India. At a time when global regulators are shaking, NPCI can be well competed with Swift with new technologies to reduce costs, increase speeds and maintain the security and reliability of international transfers. Its international payments subsidiary NIPL has partnered with Discover Financial Services (US), Japan Credit Bureau (JCB), Unionpay International (China), Royal Monetary Authority (Bhutan), Ministry of Digital Transformation (Trinidad and Tobago), Electronic Conversion Network (Singapore), and Network International (UAE).
Just as the cracks occur in the UPI, the domestic digital payment system in India, although regrettable, some solace can be obtained from the fact that even a viable Swift will not get rid of the interruption and that transparent acceptance of the problem is as annoying and unsatisfactory as in the case of UPI. If the market is to work effectively, it must apply the invisible hand of Adam Smith.
The author is an outstanding researcher at the Chintan Research Foundation and was associated earlier with the IAS and the World Bank
