Two Sides of India’s UPI

Mastercard’s CFO, speaking recently at a UBS conference, has raised issues with India’s Unified Payment Interface (UPI) system. Describing it as ‘fantastic at many levels’, he also said it was an ‘incredibly painful experience’ for its ecosystem participants. He had reservations about its commercial sustainability.

Card penetration in India is low, with debit cards making up 13% of cashless payments, credit cards 26% and UPI 56% (source: Reserve Bank of India). UPI only started seven years ago and, unlike card schemes, functions at almost no cost for merchants. Its growth is helped by support from the government and regulatory bodies and India’s rapid adoption of mobile digital payments.

Mastercard claims that the banks who enable UPI payments make a loss on them, which must be unsustainable in the long term.