UPI is, thus, advantaged among digital payment methods like IMPS, NEFT, RTGS, and those involving debit and credit cards and prepaid payment instruments, which are chargeable.
Questions remain over whether users or taxpayers should foot the UPI bill, and how these charges are to be structured.
UPI payments are, despite their incredible growth, not universal. This weakens the case for tax-funded development. Objective of universalising this mode of payment could be aided by cross-subsidised services.
A tiered charge fits into this scheme of things. The fee structure could become an issue in UPI’s interoperability with international payments systems based on transaction charges. Without waiver of merchant charges, UPI loses its competitive advantage, and consumer choice is influenced by the value proposition of alternative payments systems. Some of these systems are built on a viable pricing architecture.
The nature of international transactions also adds stacks of revenue through currency conversion and travel service fees. The small transaction interface can be widened to cover larger financial flows provided transaction charges are priced in.There is the issue of whether UPI is the best means available to spread digital transactions. Digital currencies have an advantage over UPI because the decentralised blockchain is far more efficient as a payment method than a system using QR code. Monetary authorities, banks and card companies are mainstreaming digital currencies as consumers gravitate towards payment systems involving cryptocurrencies, biometrics, contactless systems and QR codes.
Stablecoins, and within them the subset of fiat digital currencies, have the biggest potential to disrupt commercial payments worldwide. By keeping UPI free, India is pushing a payment rail when the future of finance is decentralised.