Editorial: UPI should be put to good use

The UPI, or United Payments Interface, is undoubtedly something India can be proud of. A digital payment system and a protocol developed by the National Payments Corporation of India (NPCI), it has clocked billions of transactions valued in trillions of rupees. That indeed is a success story. Only now do the US and some European countries have payment systems, but not as versatile and extensive as India’s homegrown real-time digital payment system.

As UPI usage and the resultant traffic have been growing in leaps and bounds, its digital infrastructure has come under pressure. The high level of integration, the ease of use of multiple features, and that too free of cost, has reportedly led to heavy usage. So inevitably, the NPCI has now announced some restrictions with regard to balance enquiries, retrieving information about the linked bank account, and how often one could refresh if a transaction is pending. The NPCI hopes that the new changes will prevent slowdowns and service disruptions.

The UPI journey in future is likely to face some challenges. There have been hints about charging a fee on UPI transactions, but the government has scotched them as baseless reports. So far, the government has been subsidising the service and might continue to do so for some more time to come. The second challenge is the use of UPI data by tax authorities. Recently, the slapping of tax notices on small vendors has set the cat among pigeons, with traders refusing to accept UPI transactions. The Centre got into a firefighting mode and issued a clarification to allay their fears. But there is a likelihood of such problems coming up every now and then.

The main attraction of UPI is its ease of use, and its weakness is the data generation, which can be leveraged by government and commercial entities and at times it could go against the interests of the UPI users. Inherent in its design is the involvement of multiple players – UPI apps, banks, financial institutions and of course, commercial entities. In principle, multiple entities could access and leverage the user’s data. As the adage goes, when something is free, the user is the product. Digital freedom and privacy activists argue that in the long run, the data collected could be used for profiling, which can be put to good and not-so-good uses. And there will always be the temptation in the government and commercial entities for the latter. And then there’s the perpetual danger of UPI-connected cybercrimes. But the onus of keeping their UPI activities safe and secure continues to be on the end user.

The success of UPI in itself has been quite significant, but hard cash continues to be the king. Though one of the avowed objectives of the 2016 demonetisation was to nudge people to shift from cash to digital payments, the COVID-19 pandemic did the trick. But eventually, the circulation of cash more than doubled. The positive spin is to attribute it to the growth in the economy and banking and ATM network in rural areas, which might partly explain it. The other reasons include tax evasion and corruption on the one hand and the growth of the informal economy on the other. And, that does not augur well – neither for the health of the economy nor for the claims of good governance and corruption-free India.