Are We Spending More Money Because of UPI? (ft. Ateesh Tankha)

[00:00:00] Today on The Big Story

[00:00:02] Now if I give away 100 rupees for a 100 rupee transaction to make up that 100 rupees, I will need to generate another 250 transactions of 100 rupees without an incentive.

[00:00:14] So this becomes an impossible task.

[00:00:17] And it's interesting how something so basic sounding like UPI can actually be the center of such a big financial revolution essentially right?

[00:00:27] UPI is a railway track. So imagine a future where the government owns all the railway tracks, the government owns all the stations.

[00:00:37] Eventually does UPI need to be profitable or just enough to sustain itself?

[00:00:44] The views expressed in this podcast are the speakers own. The Quint neither endorses nor is responsible for them.

[00:00:53] Hi Pratik, hello.

[00:00:54] Hello, hello Anjali, what's up? Hello to our listeners.

[00:00:57] What's up?

[00:00:59] I didn't say hello to the listeners. I'll have to do it again.

[00:01:01] Anjali doesn't care about you guys.

[00:01:03] I do, that is why I'm redoing this. Please take the second take.

[00:01:06] No, no, no.

[00:01:07] Hello listeners and Pratik.

[00:01:09] Welcome to The Big Story.

[00:01:10] First listeners from me, I'll take them first from you.

[00:01:12] Yeah.

[00:01:13] My daddy's name.

[00:01:16] Consumer is the king.

[00:01:18] Please.

[00:01:19] Okay so Anjali, what's up?

[00:01:22] Fog.

[00:01:25] No.

[00:01:26] Sorry, I had to say it.

[00:01:28] I tried very hard resisting it.

[00:01:30] Full three second pause I took not to say fog but you said,

[00:01:33] What's going on?

[00:01:34] It was a trap and guys Anjali got trapped.

[00:01:37] So now they'll have to do UPI for me for 1000 rupees.

[00:01:41] And the segue to this conversation is that only because in this episode we are talking about UPI.

[00:01:51] What is the full form of UPI?

[00:01:53] Unified payment interface.

[00:01:56] I was gonna say universal but I am a fact based podcaster.

[00:02:02] So I have done my Google's.

[00:02:06] So yes, we are talking about UPI because recently,

[00:02:12] I don't know if it's recently, but a lot of times we realized that UPI is all around us

[00:02:17] and I haven't personally gone to an ATM or I don't carry cash as much as I used to.

[00:02:23] Anjali, how much cash do you carry? Do you have in your wallet right now?

[00:02:27] More than not carrying cash, you have the confidence of stepping outside your house without having cash.

[00:02:32] If I see anything, I'll take cash from someone.

[00:02:37] So yeah, we want to talk about UPI and understand how does it work?

[00:02:43] How is it different from some other payment methods that we have?

[00:02:47] Debit cards, credit cards, cash.

[00:02:50] Cash by the way, now seems so archaic right?

[00:02:54] Yeah, I have one person in my whole chain of merchants that I interact with everyday.

[00:03:04] The guy who cleans my car and he's also the same guy who,

[00:03:10] irons are clothes and he's the only person in my whole life who doesn't take UPI.

[00:03:16] I don't know why and every time he sends his, and he's also very shana.

[00:03:21] Earlier he used to come to ask for the bill and all, he would come once or twice a month

[00:03:27] and I would always tell him, UPI please take it, why don't you take cash?

[00:03:32] Now he sends his son, he's so cute, he can't even refuse.

[00:03:38] And every time he comes, it's like a half an hour job just to find money.

[00:03:44] From, I mean I go to my mom's house to get a panic.

[00:03:47] At that time I tell her, where is your purse? Where is your dad's purse?

[00:03:51] Where are you taking off?

[00:03:52] You get a note of Rs.10 or Rs.50 by collecting it.

[00:03:56] Because we don't have Rs.50 cash in our house dude.

[00:04:00] This is so...

[00:04:02] I don't know that I think about it, it's dangerous.

[00:04:05] In my everyday life also, I think only the taxi or taxi rickshaw are the only people that...

[00:04:14] For whom I carry cash.

[00:04:16] They don't take UPI, not so much in Bombay.

[00:04:21] I mean you have to ask, do you have UPI? There's a chance they might say no.

[00:04:25] So it's not like a foolproof thing.

[00:04:27] But this is what I experienced when I went to Bangalore.

[00:04:30] There every rickshaw guy, I went for a four day trip and I did not...

[00:04:36] Trust Bangalore cabbies to be as tech savvy as their engineers.

[00:04:41] I was in Bangalore for four days, I did not pull out my wallet even once.

[00:04:46] Everything, everybody there's not one person who did not take a UPI payment there.

[00:04:52] Nice, nice.

[00:04:54] Interesting.

[00:04:55] I think in this conversation also, since you talked about you didn't open your wallet even once.

[00:05:02] We also want to look at personal spending habits right?

[00:05:06] Because this is a theory that you had introduced me to.

[00:05:09] No, I mean it is a feeling more than a theory.

[00:05:12] And it's what a lot of people also agreed with.

[00:05:16] But we have a feeling that we're spending more because it is easy to pay through UPI.

[00:05:21] You put in a code and the payment is done and you do not feel that physically, the pain of physically paying money.

[00:05:28] Yeah, you don't see your money right?

[00:05:32] So when it goes you don't feel as...

[00:05:35] And it's like you have 2000 rupees let's say in your wallet and you pay 500, you can immediately see that now you have 1500 left.

[00:05:43] That something has gone down.

[00:05:44] But you pay through UPI and you don't know, I mean it's been 1500.

[00:05:50] This gets me thinking my dad being like a dad, one of those dad conversations.

[00:05:56] He was telling me, giving me Gyan and all and he said you should always know how much money is there in your wallet.

[00:06:03] This was back when I was in 6th or 7th and when I had my first wallet or the first time I was taking my wallet in school.

[00:06:11] And my dad would be like you should always know how much money is there in your wallet.

[00:06:14] And at that time it used to make so much sense to me but now that I think of it, I know how much money is there in my wallet because it's zero.

[00:06:24] Like when it comes to cash.

[00:06:26] But I don't know what my balance is dude.

[00:06:28] Yeah, it's very difficult to keep track of it.

[00:06:31] Which is why I think that we are spending more.

[00:06:35] But I don't know we'll find out during the course of...

[00:06:39] But also what we want to look at while talking about UPI is a lot of our experience with UPI has been as consumers.

[00:06:46] We've looked at it as a way for us to pay money to merchants, to pay our friends, family whatever.

[00:06:51] But there is a lot of other stakeholders in the process.

[00:06:55] Especially you have your merchants, you have the banks that are facilitating these transactions, basically doing these transactions.

[00:07:03] And then you also have the government which is doing I think a more of a regulatory role here.

[00:07:10] But there are other people involved in this process that we do not necessarily know how they look at UPI and...

[00:07:17] Yeah, and where they fit in the whole chain of transactions right?

[00:07:21] So that is also something that you want to understand in this podcast.

[00:07:25] And one theory that I am very excited about and I really want to talk about it is...

[00:07:34] And this is from my personal experience with Google Pay, one app in particular.

[00:07:39] Is that they used to give a lot of cash back earlier.

[00:07:43] Now they don't.

[00:07:44] They don't give. How much more do you have to scratch? I'm tired, you better look next time soon.

[00:07:49] Tell us in the comments if you have a cashback of some actual rupee in the last week and not some code or not some random astrology app

[00:07:59] Coven code or better luck next time as Anjali said.

[00:08:04] So that sort of got me thinking that is UPI then just another startup?

[00:08:09] In the beginning...

[00:08:11] It has something to do with science.

[00:08:13] Science is there because it came so quickly.

[00:08:16] I don't think from today...

[00:08:19] I remember when I was in college for the first year of UPI, I think in the second or third year it was because of one of some of this Google Pay thing only

[00:08:29] Cashback.

[00:08:30] Yeah you refer and then you will get it on the referral.

[00:08:34] Yeah yeah yeah yeah a friend of mine said that you will send 50 rupees so we will get 50 rupees.

[00:08:38] And at that time it was called Tez.

[00:08:40] Fun fact if you guys are too young to remember Google Pay was called Tez.

[00:08:45] So this is how it came so quickly.

[00:08:47] Gave so many cashbacks not a lot of cashbacks anymore.

[00:08:51] It used to give so many freebies but now there is actually conversation of making it chargeable for people right?

[00:08:57] Which is the classic startup move.

[00:09:00] So first delivery charge free, all free cashback and after that 100 rupees in the order of delivery charge

[00:09:07] 50 rupees all of that right?

[00:09:09] So we shall also discuss it with our guest.

[00:09:12] Because we are also having a bit of a hard time understanding where are they making money

[00:09:17] or how do they eventually plan on making money?

[00:09:20] Who do they charge?

[00:09:22] Do they charge us the consumers? Do they charge merchants?

[00:09:26] Yes these are some of the questions that we have and who is going to answer these questions Anjali?

[00:09:32] So we have one guest on this podcast. His name is Ateesh Tanka and he is currently the founder and CEO of also wise content solutions.

[00:09:42] But he used to be the head of Citibank's merchant services till 2016 so he has had a lot of experience in payments and banking

[00:09:53] and he continues to have that penchant for all of these because he writes about digital payments, digital commerce, frauds, cybersecurity all of that.

[00:10:03] He's written on the quint and he is also like a regular columnist with economic times.

[00:10:09] So we have got him on this podcast to answer all of our questions.

[00:10:14] Okay so let us jump straight into it and talk about money.

[00:10:19] Hello Ateesh welcome to the podcast.

[00:10:21] Hi Anjali, hi Pratik and thanks for inviting me to your podcast.

[00:10:25] How's your day going?

[00:10:27] It's going well. It's been very busy.

[00:10:30] Where are you based out of?

[00:10:32] So I am currently based out of Kolkata but I divide my time between India and Singapore so my office, my development team are here but I travel across India anyway.

[00:10:45] Okay so in this episode we decided to talk about UPI right?

[00:10:50] Which has emerged as this crazy phenomenon in the past few years.

[00:10:56] So why don't you like for all our listeners just explain what UPI is?

[00:11:03] I am sure everybody knows but what is that thing that you know...

[00:11:08] So you know if I, yeah so that's a great question.

[00:11:11] If I were to actually explain UPI to the lay user it's basically a system which uses a mobile phone typically a smartphone to relay a transaction of funds from one bank account to another.

[00:11:27] Right?

[00:11:28] So normally when you needed to make a payment to anybody you would either need some kind of physical device like a credit card or a debit card or you'd need to write a check.

[00:11:37] Right?

[00:11:38] In the physical world or if you were making an online transaction then you would typically need a wallet or you would need to go to you know Flipkart or Amazon who have their own checkout parts with their own wallets into which you typically load a card of some sort or some funding device to make a payment.

[00:11:56] The beauty of UPI is really in its simplicity right?

[00:12:00] So regardless of how tech savvy you are all it says is do you have a smartphone?

[00:12:05] Yes.

[00:12:06] Do you have a bank account?

[00:12:07] Yes.

[00:12:08] Once these two boxes are checked any participating bank account can be paid and any participating bank account can be used to receive funds.

[00:12:17] Right?

[00:12:18] And if I'm not wrong you don't even need to have a smartphone essentially right because there is another way for feature phones to do that.

[00:12:26] There's a code that needs to be...

[00:12:27] That's right right so you need to yes basically the beauty with UPI is you have a UPI code right and you have your password.

[00:12:36] In the event that it is a smartphone you can obviously scan a QR code put in your password and you're all done right?

[00:12:41] So yes you can do it either way and most recently what UPI has done is they've introduced something called UPI light.

[00:12:49] So in certain rural areas where they don't even have proper internet connectivity or phone connectivity it will allow a transaction up to 200 rupees which will then be settled later.

[00:13:00] Right?

[00:13:01] So as long as they consider you in good standing they will allow that transaction and then the settlement happens in a batch process later.

[00:13:07] Right?

[00:13:08] So UPI is trying very very hard to appeal to every segment of society and is trying very hard to enable digital payments at all levels and you know regardless of the denomination.

[00:13:19] So it doesn't matter whether it's less than 200 greater than 2000 you can pretty much use UPI anywhere.

[00:13:25] In fact the most interesting thing I know about UPI is people of our socio-economic category today have stopped going to the ATM because of UPI.

[00:13:35] Yes.

[00:13:36] That's a very very big change to even something just before the pandemic right?

[00:13:42] And of course for the rest of the people it allows them to access electronic commerce, it allows them to make payments you know without having to pull out cash or access cash and so UPI has been very very successful.

[00:13:54] Now one thing I would like to say is I just share this very small anecdote and I was talking to this stand up comedian about another story about how stand up comedy has you know evolved in India and he said that one of the biggest factors of you know all of this live music

[00:14:11] and live stand up becoming so big was UPI because people in small towns you don't have your book my show online net banking etc.

[00:14:20] Correct.

[00:14:21] So what this is when you pay out QR scan and payment there just go in.

[00:14:27] So that's so great.

[00:14:28] It's an instant payment mechanism right?

[00:14:30] And you don't need any special wallets, you don't need to be able to access anything.

[00:14:34] So it has been a very great democratic force within the payments world in India.

[00:14:41] So in that respect you know hats off to UPI.

[00:14:44] And is it something unique to India?

[00:14:47] Yes there are reasons for that right?

[00:14:49] So unlike the developed world you take a place like America or take Europe or even Latin America.

[00:14:54] The proliferation of electronic commerce typically happen through cards.

[00:14:59] In India despite our giant population I want to say out of I want to now guess 1.4 billion less than 20 million have credit cards.

[00:15:12] And despite the fact that we claim that we have issued 900 billion debit cards the actual users will probably be in the region of 200 million.

[00:15:21] So a billion people are excluded from that system.

[00:15:24] In America that's not the case everybody has a credit card everybody has a debit card not just one they probably they'll pull it out like a pack of cards and ask you to pick one.

[00:15:32] You know what I mean?

[00:15:33] There are that many right?

[00:15:34] So it's a it's a lot of people who have that credit card book where they have different things for airlines different thing for petrol.

[00:15:41] So it's a very very different world out there and so UPI has actually gone a long way in allowing people to pretty much pay in a cashless way.

[00:15:52] But I would like to caution you you know there are a lot of creation myths that have begun to surround UPI right?

[00:16:00] Now when NPCI actually developed UPI they developed it in a small way they said that you know we're going to allow peer to peer as in person to person transactions right?

[00:16:10] In an easy way on the phone as long as you have a bank account.

[00:16:13] NPCI is the company that created it?

[00:16:16] That's right National Payment Corporation of India right?

[00:16:18] It's an umbrella corporation pretty much hosted by the RBI and originally it had only 10 charter banks which included two foreign banks City Bank in HSBC

[00:16:29] The other eight wall Indian banks SBI HDFC Bank of Baroda you know ICICI etc.

[00:16:35] Today it has over 382 banks payment service providers etc.

[00:16:41] In a span of just five years by 2021 this had happened there's no doubt that yes the pandemic did help right?

[00:16:48] Demonitization did not help so much.

[00:16:51] So this is a myth UPI did not take off because of demonetization it was very very small at the time.

[00:16:57] I think in many ways UPI has flabbergasted its own creators they didn't think it would become so big so quickly.

[00:17:05] I'm being very honest right?

[00:17:06] I'm very glad it has but I don't think that was within their plan.

[00:17:10] There is an attendant danger to this when you grow too quickly the questions that are always at the back of your mind is can I continue to afford it?

[00:17:18] Right.

[00:17:19] Because there are no free lunches there is a cost associated.

[00:17:22] Do I have sufficient fraud early warning systems in place so that the average user does not get defrauded does not get cheated?

[00:17:30] And as you know UPI itself has attracted a lot of fraudsters right?

[00:17:34] And there's a lot of stuff happening in that region.

[00:17:36] And then number three as I accumulate more and more players how do I make it economically viable for the entire payment chain?

[00:17:44] Because by continuing to say zero MDR zero MDR zero MDR a lot of people say you know what is not worth it let somebody else do this.

[00:17:51] And that's exactly what is zero MDR what does that mean?

[00:17:55] Okay good good point.

[00:17:56] So in any payment chain except for cash right except for cash there is a cost associated with transferring a payment from A to D right?

[00:18:07] Very often as it becomes more electronic as it becomes more seamless there are more and more payment intermediaries between the pay bank and the receiving bank right?

[00:18:18] So each of these people are performing a function right?

[00:18:21] One could be actually creating a card one could be issuing the card one could be taking the risk on the card somebody else could be hosting a payment gateway.

[00:18:30] Somebody else could be settling at the other end each of them deserves a certain amount of that transaction value to survive.

[00:18:38] Now historically in the world of credit cards and debit cards the issuing bank never paid a penny.

[00:18:45] Okay.

[00:18:46] The issuing bank basically said that since I am taking the risk of the payment right?

[00:18:52] I need to be paid something by way of compensation that was called interchange.

[00:18:57] So interchange is the amount paid essentially by the merchants bank to the consumers bank.

[00:19:04] Okay.

[00:19:05] Right?

[00:19:06] In addition to interchange which is paid to an issuing bank there are a host of other small fees 10 BIPs.

[00:19:13] 15.1% 15 BIPs 20 BIPs adding all up you know to master card.

[00:19:19] The issuing bank here saying is the bank that sends the payment.

[00:19:22] That gives out the payment.

[00:19:24] So if I am the buyer if I am the buyer and I have an HDFC bank card HDFC is the issuing bank right?

[00:19:32] If I am making a payment at Spencer's and Spencer's has its own bank whatever let's just call it ICICI for simplicity sake.

[00:19:40] ICICI becomes the acquiring bank right?

[00:19:42] At that point of sale right?

[00:19:44] So I basically hand over my card I make a purchase goods are transferred to me and there's a settlement that happens from HDFC to ICICI.

[00:19:53] But a certain amount called interchange has to be paid back to the issuing bank.

[00:19:58] In addition to that the merchant has to pay a cluster of small fees.

[00:20:03] It has to pay small fees to master card or visa depending on who the network is.

[00:20:07] It needs to pay a small amount to the acquiring bank for managing that.

[00:20:11] There's a POS you know the machine provider.

[00:20:13] There's a gateway fee etc.

[00:20:15] So when you add it all up typically in India the total merchant discount rate which includes interchange ranges between about say 1.6-1.7% all the way up to 3%.

[00:20:29] So for every 100 rupees right when I pull out a card that's typically the discount rate that is applied.

[00:20:36] Is this why a lot of times people either refuse to accept card at a below a certain transaction amount or something like that?

[00:20:46] Is this the reasoning behind that?

[00:20:48] This is the reason right that they pretty much refuse and in some cases when it comes to AMEX because AMEX charges are much higher.

[00:20:56] They don't accept that.

[00:20:58] They say AMEX you know we don't accept AMEX right?

[00:21:01] So that happens in certain merchant locations as well right?

[00:21:05] In the case of UPI however because the government was in a hurry to drive acceptance not so much for consumers.

[00:21:12] So P2P continued to grow person to person right?

[00:21:16] But when it came to person to merchant right where you know you have the small Panwala, you have the small Kiranadukhan as the case may be.

[00:21:23] Those guys were not willing to pay a discount as it is they have the vagus notion of how they're making profits.

[00:21:30] I'm being very honest right?

[00:21:32] As much as we think that they are hardcore you know businessmen sometimes they have a vague idea of how they make profits.

[00:21:37] So these guys said listen you just host this QR tent card or this sticker right and there will be no charge right?

[00:21:44] You need to have a bank account and this money will automatically fluent your bank account right?

[00:21:49] So as far as the merchants were concerned their idea was it's no skin off my back, we'll put it up there.

[00:21:55] The problem was that the Indian banks were not interested.

[00:21:59] So let's just be honest about this why is phone pay and Google pay?

[00:22:05] Why do these two wallets control 80% of all UPI transactions followed by Paytm which controls another 16%

[00:22:13] and then you have WhatsApp pay etc which controls about 2%.

[00:22:17] The total banks in India through their own UPI apps have less than 2% of all transaction value.

[00:22:24] Why? Because banks are not interested. Banks are not in the business of payments, banks are in the business of lending.

[00:22:32] They make money from lending right? So they say you know what am I going to do half these transactions are sub 500 rupees.

[00:22:39] I'll have to put a tent card. Tent card's useful life is not more than 90 days.

[00:22:44] After 90 days I'll have to replace it. I'll have a massive manpower running around India.

[00:22:50] He said let Paytm do it, let phone pay do it which is why if you go to any Paan Dukhan or Kiranadukhan whose tent card is there.

[00:22:57] Paytm, phone pay right? Why? Those are the guys who've really done the work if you ask me of driving acceptance

[00:23:05] and because these QR codes are interoperable that means that it doesn't matter which app I open up

[00:23:11] it will read the QR code and I can transfer the money. It has made it a very very seamless process.

[00:23:16] So Ateesh if we go back a little bit when you were talking about all the fees that a merchant had to pay

[00:23:22] so you're saying the easier it is for a consumer to make the payment the more people are involved in that process.

[00:23:30] So if we compare to let's say a credit card transaction to a UPI transaction

[00:23:35] how many more stakeholders or how many more people are involved in a UPI transaction as opposed to let's say a card payment?

[00:23:42] So I'll be honest if you're looking at the convenience of the transaction today for all transactions sub 5000

[00:23:49] you can take your credit card or debit card and you can tap it. When it comes to UPI in fact you need to open your app

[00:23:57] putting your password and pay so if you ask me the debit or credit card transaction is simpler.

[00:24:02] But how many people today in India have credit cards and debit cards? It comes down to that right?

[00:24:10] Banks don't want to lend. Remember a credit card is an unsecured loan. What happens if I take a car loan?

[00:24:18] If I default the bank can appropriate my car right? With a credit card they can't do anything.

[00:24:24] So banks are very very circumspect about how to give money on credit cards. So it is a loan.

[00:24:30] What is a credit card? It's essentially a line of credit right? With debit cards again

[00:24:35] yes a lot of people have debit cards but very often they don't want to have to carry a debit card

[00:24:40] they worry if I carry a debit card somebody will steal it from my wallet etc.

[00:24:44] There's all sorts of psychology is around this right? And UPI is just much simpler because everybody carries the phone

[00:24:51] nobody forgets the phone. People may forget their wallet right? But people will not forget their phone right?

[00:24:56] And so it makes it that much easier to make these payments. That's the basic funder behind why this has grown right?

[00:25:05] So let's talk about some of the other reasons it's grown right? Unlike as I told you how many people own credit cards or active debit cards

[00:25:14] in India by 2020-21 there were about 750 million active internet users.

[00:25:21] Now doesn't mean that you are using it on a laptop or a desktop you could also be using the internet on your phone right?

[00:25:26] And the phone is the most ubiquitous device. By last year there were already 700 million smartphones that had been shipped

[00:25:33] and they say that by 2026 there will be over a billion smartphones. So more and more in India people are carrying smartphones

[00:25:42] because feature phones are disappearing I'm being very honest they are disappearing right?

[00:25:46] Everybody knows how to use WhatsApp and everybody has learnt how to use UPI right?

[00:25:52] If you think about it WhatsApp and UPI are the mainstay of all mobile activity. Forget about people like us we are more sophisticated

[00:26:01] we can do whatever right? But for the average person it is WhatsApp right? And it is UPI right?

[00:26:08] And so UPI has grown the way PTM could not grow. So PTM to be honest to them they never had a business model

[00:26:17] but they were very diligent in building the market right? So they were the pioneers when it came to the wallet right?

[00:26:24] And they really tried to grow the market they were hoping that after demonetization PTM would explode in terms of growth

[00:26:34] What actually happened was that the RBI came down on them. The RBI if you remember from 2017 to 2018

[00:26:42] they never let them onboard a single customer. Why? Because they say that they were in violation of KYC norms right?

[00:26:50] And so they shut them down. Which is after which then they got much more stricter with how they allowed even peer to peer

[00:26:58] I remember so many people who stopped using PTM for KYC because now they are like

[00:27:04] Correct you will have to do KYC. Number one, number two, PTM until 2019 did not have a proper fraud or early warning system

[00:27:12] So fraud was also beginning to mount so people were saying you know what I don't want to use this anymore

[00:27:16] I had a lot of fun with it in the last three years but now I don't want to use it

[00:27:20] And then on the back of that suddenly UPI began to explode. So people said wow I got a much easier system here

[00:27:26] And PTM and phone pay jumped onto the UPI bandwagon. So they basically became in one sense the kind of

[00:27:33] Acquirers, the enablers at the point of sale and you could continue to use your PTM wallet to make UPI transaction

[00:27:41] And so they made sure that their top line growth existed even though because of zero MDR etc.

[00:27:47] They were not earning anything. Now to be honest when it comes to PTM

[00:27:52] One of the questions a lot of people ask is why did PTM not do as well as UPI?

[00:27:59] UPI did not give away money itself. What did PTM do? PTM said you spend 100 rupees if you remember 5-6 years old

[00:28:08] Spend 100 rupees get another 100 rupees right?

[00:28:11] But I think even Google pay and phone pay at the very start of it gave a lot of those cash back

[00:28:19] Correct but again those are remember those are all wallets that's not UPI those are wallet those are private companies

[00:28:26] UPI abs, essentially. Now the problem is that on every transaction 100, just for simplicity 100 rupee transaction

[00:28:34] The net profit before tax that PTM earns is probably 30 to 40 paisa

[00:28:42] Now if I give away 100 rupees for a 100 rupee transaction to make up that 100 rupees

[00:28:48] I will need to generate another 250 transactions of 100 rupees without an incentive

[00:28:54] So this becomes an impossible task it becomes a paradox

[00:28:59] When you like catch up you will never catch up right?

[00:29:02] If you know what I'm trying to say so if some if there's a runner running a race with you and that guy is always double your speed

[00:29:09] You can never catch up you can try to do the math but you can never catch up right?

[00:29:13] It just doesn't make sense right? So this is one of the problems with a lot of these wallets

[00:29:18] They've spent a lot of money getting people to become users but there's no profit in the payments

[00:29:25] Now PTM bank various companies are trying to sell insurance

[00:29:30] Phone pay is trying to drive them towards e-commerce and insurance etc.

[00:29:34] They can earn money there but from the payments itself there's no money

[00:29:38] Right so that becomes a very big problem for a lot of these wallet operators

[00:29:45] So you're saying that at the very base of it their business model was what was not working for PTM

[00:29:51] So how does the business model of a Google pay or a phone pay differ from that?

[00:29:59] So Google pay doesn't make any money at all whether it gives an incentive or not

[00:30:06] Why? Okay so there are two types of wallets you have something called a back-to-back funding wallet

[00:30:13] So in phone pay and in PTM using a credit card debit card bank account whatever

[00:30:19] I will fund PTM right? That wallet correct

[00:30:22] And then when I go to make a purchase with the PTM wallet the money is already there

[00:30:26] That money will be used to pay the merchant

[00:30:29] So in a sense from a payments perspective PTM is paying the merchant

[00:30:34] I am not paying the merchant because I have already paid PTM

[00:30:38] I have added money already

[00:30:39] Exactly in the case of Google pay it's a pass-through wallet

[00:30:43] That means that Google pay for instance is a pure UPI wallet

[00:30:47] What do I do? I basically open it up scan the QR code put in my thing

[00:30:51] Enter paid you get the tick mark paid

[00:30:54] It's a pass-through wallet

[00:30:55] Google's play is not about payments

[00:30:59] They actually want to try and harvest data

[00:31:02] They want to try to figure out where all these people are playing

[00:31:06] Where does Google make its money? Advertising

[00:31:09] It doesn't make its money from payments

[00:31:11] It's not really a payments play

[00:31:13] This is an adjacency to its core business right?

[00:31:15] In general search engine, YouTube it doesn't make any money from either videos

[00:31:20] Exactly that's the whole idea

[00:31:24] So even with PTM and all of that I think everybody understands

[00:31:28] We are not going to make money purely from payments

[00:31:31] But as I grow a larger and larger base that is more and more engaged with my wallet

[00:31:37] What can I use my wallet for?

[00:31:39] Can I now use it to cross-sell them insurance?

[00:31:43] Can I use it to cross-sell them a bank account or an instant loan

[00:31:47] Buy now pay later loan

[00:31:49] Can I use it to somehow advertise certain things to them

[00:31:53] Drive them to certain e-commerce sites etc

[00:31:56] That's where they hope the money will come from

[00:31:59] So we have talked about various kinds of revenue models of different entities

[00:32:05] Like PTM, buy now pay later

[00:32:06] But how does something like NPCI make money?

[00:32:11] So NPCI is a non-profit

[00:32:14] So you know a lot of people think it's a private company

[00:32:17] In one sense you can call it an independent company

[00:32:21] It is an umbrella organization

[00:32:23] RBI and then charter banks and then members

[00:32:29] Members can include PTM, non-charter banks etc

[00:32:33] Today as I told you they've got about 380 various members

[00:32:36] They are not for profit organization

[00:32:39] So they are not expected to make losses

[00:32:42] But I guarantee you that today the government is subsidizing them

[00:32:46] They are subsidizing them

[00:32:48] Remember UPI is a network

[00:32:50] UPI itself does not say here use my app

[00:32:54] They say use your bank app, use PTM, Google Pay etc

[00:32:58] But UPI is basically providing a network

[00:33:01] Originally it was meant for P2P transactions

[00:33:04] Then it became P2M

[00:33:06] Now they have said that you can even rupee credit and debit cards can be used on the network

[00:33:11] Now they have even said that a lot of these banks, Indian banks

[00:33:15] Can have prepaid loans associated with you

[00:33:18] And they can offer it through UPI at the point of sale

[00:33:21] So let's say that I am going to make a purchase

[00:33:23] I am going to buy something which is 6000 rupees in a store

[00:33:28] State Bank of India who is my bank

[00:33:31] Realizes that you are going to make this

[00:33:33] They may come back and say listen

[00:33:35] I've got a very attractive personal loan for you

[00:33:37] I can break this 6000 into 4 payments of 1500

[00:33:41] Would you like to take it?

[00:33:43] Press yes? Ok, all set

[00:33:45] So they become also like a buy now pay later

[00:33:47] Or they give you an instant loan on the spot

[00:33:49] So UPI makes no money

[00:33:52] So for all of them lending is where the money is

[00:33:56] And so through all of the other processes

[00:34:00] They are trying to get as many users as they can

[00:34:03] Either lending or data or loans or something

[00:34:06] Besides the payment itself

[00:34:08] Absolutely, absolutely

[00:34:10] I mean how do credit cards make money?

[00:34:12] They induce you to spend more

[00:34:15] More than you can pay

[00:34:16] More than you can pay back in the hope that you will revolve

[00:34:19] Whatever you have and they will earn interest

[00:34:21] Otherwise credit cards lose money with me

[00:34:24] I don't revolve

[00:34:25] And they lose a ton of money with me

[00:34:29] Because also my credit card bill is not 1500 rupees

[00:34:32] It is considerably more

[00:34:33] So they are losing a lot of money

[00:34:35] So they need to pay for rewards

[00:34:37] And interchange typically pays for rewards

[00:34:39] So it nets off at zero

[00:34:41] So that's what happens

[00:34:44] But if we go on a more personal level with UPI

[00:34:46] So this is something that really sparked

[00:34:49] Our discussion on UPI

[00:34:51] Started from a lot of people realising

[00:34:54] That having such an easy form of payment

[00:34:57] Made us all spend much more money

[00:35:00] But statistically speaking do you think that

[00:35:02] UPI is really doing that

[00:35:04] Changing any of our spending habits?

[00:35:06] I'll be honest

[00:35:07] I have not seen the data

[00:35:09] It may be happening

[00:35:10] But I don't want to talk out of turn

[00:35:12] I personally have not seen the data

[00:35:14] Like you I'm very interested to know if this is true

[00:35:17] It is true that UPI has grown

[00:35:20] By leaps and bounds

[00:35:22] But especially during the pandemic

[00:35:25] It basically grew at the expense of cash

[00:35:28] There was a myth being circulated

[00:35:31] That if you paid by cash you would get COVID

[00:35:33] Which is absolute nonsense

[00:35:35] You are more likely to get COVID

[00:35:37] By somebody coming close and touching plastic to plastic

[00:35:40] Than you are from paper and cotton

[00:35:42] Which is what cash is made of

[00:35:44] But I have not really seen it

[00:35:47] Now there is a research agency

[00:35:50] Called CEBR

[00:35:52] That came out and said that during the pandemic

[00:35:55] UPI was able to save

[00:35:58] The government about 12.5 billion rupees

[00:36:02] In cash related expenses

[00:36:06] Which has resulted in an impact to India's GDP

[00:36:10] Of 16.5 billion etc

[00:36:13] Save as in sorry

[00:36:14] How did UPI manage to save that much money?

[00:36:17] And what are these cash related expenses?

[00:36:20] You need to print cash

[00:36:22] You need to stock cash etc

[00:36:24] So what you do is that for every

[00:36:26] I am just going to make it up

[00:36:28] For every 2000 rupees note that you produce

[00:36:31] Let's say 3 paisa is the cost of storage

[00:36:33] Transport etc

[00:36:35] So when you multiply all of that

[00:36:37] And say that I didn't need to print so much

[00:36:39] Because people were paying bank to bank

[00:36:41] Again this is highly speculative

[00:36:44] I am sorry having spent a decade

[00:36:47] In banking, credit cards, merchant acquiring

[00:36:50] I find it very hard to believe

[00:36:53] But like I said it is possible over a period of time

[00:36:56] That UPI will spur spend

[00:36:59] But to spur spend

[00:37:01] Sorry can you explain what spur spending is?

[00:37:04] So what I mean is you want to increase spending

[00:37:06] Through a particular medium

[00:37:08] Two things have to happen

[00:37:10] Number one, it's the only way to pay

[00:37:12] Okay

[00:37:13] So hypothetically let's say that there is a village

[00:37:16] And the only way to pay is cash

[00:37:18] So the only way to increase spending in that village

[00:37:20] Is to make sure that the villagers have more cash

[00:37:23] Right, it's simple

[00:37:25] Similarly with UPI

[00:37:27] Let's assume that in the village

[00:37:29] The government somehow with a stick most probably

[00:37:32] Goes and tells every panwala and kiranawala

[00:37:34] That you will not take cash

[00:37:36] Then the only way to spend is through UPI

[00:37:38] That means that you are now going to

[00:37:40] However for somebody to spend more

[00:37:43] Than he or she is used to spending

[00:37:45] You need to have a cushion, a comfort

[00:37:48] You need to believe that I can take a line of credit

[00:37:51] So this is the most important thing

[00:37:55] So the government is now trying to make sure

[00:37:57] That UPI also becomes a channel for pre-approved loans

[00:38:01] Use a credit card

[00:38:03] If at some point in time

[00:38:05] This makes sure that even people at the bottom of the pyramid

[00:38:08] Get a small line of credit

[00:38:10] So if somebody today gets 1500 rupees in cash

[00:38:13] And spends 1400 rupees

[00:38:15] Just making up a number

[00:38:17] And tomorrow in addition to that

[00:38:19] They get another 1000 rupees of credit

[00:38:21] Easy credit

[00:38:22] They may end up spending 1800 rupees

[00:38:25] Instead of 1400 rupees

[00:38:27] Right, and that is how that increase would happen

[00:38:30] That is how America became so big

[00:38:34] Essentially, yeah

[00:38:35] Because of credit

[00:38:36] They gave loans

[00:38:37] Because of credit, not that's correct

[00:38:39] So this is a challenge

[00:38:42] This is a quandary for the government

[00:38:44] When the government talks about financial inclusion

[00:38:46] Financial inclusion is not about giving you a way to pay electronically

[00:38:50] Financial inclusion means, am I part of the credit cycle?

[00:38:53] And do people in general have more money in their pockets?

[00:38:56] And do they feel confident enough to say

[00:38:58] You know what, instead of spending 2000 rupees

[00:39:02] This month I'll spend 3000 rupees

[00:39:04] Then the entire economy will begin to rise

[00:39:07] So correct me if I'm wrong

[00:39:09] You're saying that the nature of payments

[00:39:11] Might have changed from cash to UPI

[00:39:13] Of course

[00:39:14] But it's not that we

[00:39:17] Might be spending so much more on these numbers

[00:39:19] Because we don't have enough money

[00:39:22] So I'll give you an example

[00:39:24] Suppose Paytm comes to you and says

[00:39:26] We have grown the payments by

[00:39:29] Earlier people were

[00:39:32] And no cash, this is all electronic

[00:39:34] Earlier people were spending 100 crores a month

[00:39:37] Now they are spending 150 crores a month

[00:39:39] So that's correct

[00:39:40] However when you look to see

[00:39:42] What Paytm basically gave 50 crores away for free

[00:39:45] Say spend 100, take 50, right?

[00:39:47] So 100 crores we give

[00:39:49] That is a fallacious way

[00:39:51] That doesn't grow the market

[00:39:52] That's just a blip that will come down

[00:39:54] Similarly with the government

[00:39:56] Through the alphabet soup of all these

[00:39:58] Jandhan accounts and all that

[00:40:00] What is it?

[00:40:01] It is basically direct transmission of subsidies

[00:40:03] So if the government was giving 3000 rupees

[00:40:06] People are spending 3000 rupees

[00:40:08] If they give 5000 rupees

[00:40:10] Not necessary that they will spend 5000 rupees

[00:40:12] But they may spend 3500 rupees

[00:40:15] So in lieu of credit

[00:40:18] If the government increases the subsidy

[00:40:21] There is a likelihood that at the bottom of the pyramid

[00:40:24] People will begin to spend more

[00:40:26] And that may actually drive

[00:40:28] A little more of spending on UPI

[00:40:31] And other form factors

[00:40:32] And therefore taking up the overall GDP

[00:40:35] Through consumption

[00:40:36] Now I must tell you

[00:40:37] Recently perhaps

[00:40:40] With a view to rewarding

[00:40:44] PhonePay and Paytm

[00:40:46] Who have been bleeding profusely for the last 3 years

[00:40:49] Because of 0 MDR

[00:40:50] The government has now come out and said

[00:40:53] For any person to merchant transaction

[00:40:56] Greater than 2000 rupees

[00:40:57] On average you will earn about 1.1%

[00:41:00] As an on an interchange basis

[00:41:02] So that means Paytm, PhonePay can earn that

[00:41:05] Already merchants

[00:41:07] Yesterday I went to a very large

[00:41:09] Chinese restaurant here in Kolkata

[00:41:12] And already there was a post out there saying

[00:41:15] Until further notice we will not accept UPI payments

[00:41:19] So the same thing that was with credit card

[00:41:21] At one time that

[00:41:23] For whatever reason

[00:41:25] Now it's very difficult to

[00:41:27] Specifically explain why

[00:41:29] But already there is a bit of a pushback

[00:41:31] What does this tell me

[00:41:33] This tells me that UPI is not a small percentage

[00:41:37] Of overall payments

[00:41:38] A lot of people are using UPI to pay

[00:41:42] And if a large enough group of people

[00:41:44] Are using UPI to pay

[00:41:46] Then the interchange makes a big difference

[00:41:49] And that is where it could

[00:41:52] Impact the fortunes of UPI

[00:41:55] So if I am making a payment

[00:41:57] Let's say through my Paytm wallet

[00:41:59] To an QR code of let's say HDFC bank

[00:42:03] Then HDFC bank has to pay that money

[00:42:06] To Paytm without impacting the consumer

[00:42:08] Or the merchant as of now

[00:42:10] Or have they transferred that to the merchant as well

[00:42:13] So remember the HDFC bank account

[00:42:16] Is the merchant's bank account

[00:42:18] What it basically means is that

[00:42:20] The merchant has to pay 1.1%

[00:42:23] Look technically speaking

[00:42:25] One bank account is compensating another bank account

[00:42:28] But it's not the banks who are doing it

[00:42:30] It's basically my bank account

[00:42:32] That is being debited

[00:42:34] So that's what I wanted to understand

[00:42:36] The merchants will have to eventually pay that

[00:42:38] Interchange

[00:42:39] That is correct

[00:42:40] The consumer does not get affected

[00:42:42] But the merchant gets affected

[00:42:44] MDR merchant discount rate

[00:42:46] Is always applied to the merchant

[00:42:48] Now extending this

[00:42:50] There is also sort of like a debate

[00:42:53] And conversation about charging UPI

[00:42:58] Having some sort of a transaction fee

[00:43:00] For consumers as well

[00:43:02] So what are your thoughts about it

[00:43:04] And what are the consequences that that might raise

[00:43:06] I was on vacation in Southeast Asia

[00:43:09] When the chief architect of this idea

[00:43:12] He is a professor in IIT Mumbai

[00:43:14] Actually called me and we had a long conversation one evening

[00:43:17] And I told him

[00:43:19] I said nowhere in the world can you charge the consumer

[00:43:22] Here's the reason why

[00:43:23] The consumer doesn't care about payment form factors

[00:43:27] You want me to pay in cash

[00:43:29] I'll pay in cash

[00:43:30] If you say no cash on delivery

[00:43:32] Pay with card, I'll pay with card

[00:43:34] I'll pay however I can pay

[00:43:36] But at the end of the day

[00:43:37] By making a purchase from you the merchant

[00:43:39] I am doing you the merchant a favor

[00:43:41] So the whole point is exactly

[00:43:43] So if UPI is really growing

[00:43:46] The size of commerce

[00:43:48] Who really benefits the merchant

[00:43:50] Because without that

[00:43:52] The merchant would have fewer sales

[00:43:54] With electronic commerce the merchant is having greater sales

[00:43:57] So the merchant needs to bear the cost for that system

[00:44:01] And that is the logic that has stood the test of time

[00:44:04] For more than 70 years

[00:44:06] Across the developed world etc

[00:44:08] I think it's going to be very difficult

[00:44:10] To now come to a consumer and say

[00:44:12] You know just for the pleasure

[00:44:14] Of using UPI and pressing some buttons

[00:44:16] Now I'm going to charge you 1 rupee

[00:44:18] On every 100 rupees you spend

[00:44:20] That's just not going to fly

[00:44:21] I assure you there'll be a massive fall off

[00:44:24] Right?

[00:44:25] So that doesn't really work

[00:44:27] It doesn't really work

[00:44:28] But do you think the idea for these

[00:44:30] People who support this idea is something like

[00:44:33] People are so hooked on to UPI

[00:44:35] That then switching back to cash

[00:44:38] Or something like cards would be so difficult that

[00:44:41] You know

[00:44:42] I don't

[00:44:43] So I must tell you

[00:44:44] I disagree and I'll tell you why

[00:44:46] You look at the average value of a UPI transaction

[00:44:50] So you have two types of UPI transactions

[00:44:52] Person to person

[00:44:53] Person to merchant

[00:44:54] Person to merchant

[00:44:55] Sorry person to person is in the region of about

[00:44:58] 1500 rupees

[00:44:59] Average value obviously it's up and down

[00:45:01] But person to merchant is still very low

[00:45:04] It's only about 750 rupees

[00:45:07] When you look at a debit card transaction

[00:45:09] Which is always person to merchant

[00:45:12] It is in the region of 3500 to 4000

[00:45:16] Credit card is closer to 4500 to 5000

[00:45:19] ATM withdrawal is greater than 5000

[00:45:23] Right?

[00:45:24] So I'm just trying to tell you

[00:45:26] Even today

[00:45:27] A lot of the high value transactions are still happening

[00:45:30] On other form factors not UPI

[00:45:32] Right

[00:45:33] Right

[00:45:34] So even though it seems much more ubiquitous

[00:45:36] It is actually

[00:45:38] And don't get me wrong

[00:45:39] It is more ubiquitous

[00:45:41] It is more ubiquitous than any other

[00:45:43] But it's not having as much of a dent

[00:45:45] As we think it is right

[00:45:47] So the volume of transactions is

[00:45:50] I want to say of all electronic transactions

[00:45:53] In India UPI will be 84%

[00:45:55] It's that big

[00:45:57] Value wise it'll probably be closer to 50%

[00:46:00] So there is a fall off

[00:46:01] There is a massive fall off

[00:46:03] Right?

[00:46:04] Cash itself will be as large as

[00:46:06] Or greater than all electronic transactions in India

[00:46:08] Including UPI

[00:46:09] Yeah

[00:46:10] Even right now

[00:46:11] Even right now

[00:46:12] So it's a huge market

[00:46:14] And the thing is we have

[00:46:16] Imperfect information about what's happening

[00:46:18] Right?

[00:46:19] So when you

[00:46:20] If you tell me that every time you use your card

[00:46:22] Your UPI code will be charged

[00:46:24] This will be charged

[00:46:25] This will be charged

[00:46:26] After a while I'm going to get irritated

[00:46:28] I'll say why am I being charged

[00:46:29] You want me to pay by UPI

[00:46:31] I'm happy to pay by credit card

[00:46:33] If I pay by credit card

[00:46:34] You can't charge me

[00:46:35] If I pay by debit card

[00:46:36] You can't charge me

[00:46:37] If I give you cash

[00:46:38] You can't charge me

[00:46:39] Why should you charge me for UPI

[00:46:41] Right?

[00:46:42] So there will be a pushback

[00:46:44] It's

[00:46:45] So the other thing people must understand

[00:46:48] Even that 750 rupees

[00:46:50] Small as it seems

[00:46:53] Is driven by the top 25%

[00:46:56] Of India's

[00:46:58] Economic class

[00:46:59] Right

[00:47:00] So if that top 25% say

[00:47:02] What the hell I'll tap my card

[00:47:04] It's just as easy as doing this

[00:47:06] Right?

[00:47:07] Suddenly that 750 rupees

[00:47:08] May fall below 400 rupees

[00:47:10] And suddenly the value pie of UPI

[00:47:13] Will start shrinking

[00:47:15] Remember when the three of us say

[00:47:17] We don't go to the ATM anymore

[00:47:20] Right?

[00:47:21] That means we have decided that

[00:47:22] We will not pull 5000 rupees or more

[00:47:25] Every time we go to the ATM

[00:47:26] Right?

[00:47:27] But the average person doesn't have 5000 rupees

[00:47:30] To pull from the ATM

[00:47:31] And when I go right to the bottom

[00:47:32] Of India's pyramid

[00:47:33] Right into the

[00:47:34] So if somebody were to tell me

[00:47:36] Oh if you use a card no charge

[00:47:38] But if you use UPI one and a half percent

[00:47:40] What will you do?

[00:47:41] I'm telling you mentally I'll get irritated

[00:47:43] I'll say the hell with this here

[00:47:45] Just take my card

[00:47:46] Right?

[00:47:47] If I go and make a purchase of 10,000 rupees

[00:47:50] I don't want you to charge me 150 rupees

[00:47:52] I'm going to say what is this 150 rupees

[00:47:54] Oh for using UPI

[00:47:55] Will you accept it?

[00:47:56] You're not accepted

[00:47:57] Right?

[00:47:58] You're not going to accept it

[00:47:59] So these are attendant dangers

[00:48:01] To the entire system

[00:48:03] At the end of the day

[00:48:04] If a merchant believes that

[00:48:06] I am getting value from UPI

[00:48:08] Earlier 20 people used to come to my Kerala Dukan

[00:48:12] Today on average 50 people come to my Kerala Dukan

[00:48:14] That means that more people are using

[00:48:16] Then he or she should be willing

[00:48:18] To pay one to one and a half percent

[00:48:20] Whatever it is

[00:48:21] MDR for the purpose of enabling UPI

[00:48:23] So another thing that we want to talk about

[00:48:26] A little more in detail is

[00:48:28] How involved is the government

[00:48:30] In this process

[00:48:31] Are they looking at

[00:48:32] Are they involved just as a regulator

[00:48:34] In the form of RBI

[00:48:36] Because we've seen that the government

[00:48:38] Did develop apps such as BIM

[00:48:40] And like we discussed

[00:48:42] Even NPCI falls under a Picker umbrella

[00:48:46] That is again in the government's control

[00:48:48] In some ways

[00:48:50] So that's a great question

[00:48:52] So the government is not just a regulator

[00:48:55] Everybody in the government

[00:48:57] From the president to the prime minister

[00:48:59] To the finance minister to anybody

[00:49:00] You choose, take your pick of anyone in parliament

[00:49:02] They all think that UPI is the greatest thing

[00:49:05] If not since sliced bread

[00:49:07] Since the advent of the ATM

[00:49:09] Right, at least since the ATM

[00:49:11] This is the greatest fintech innovation in the world

[00:49:13] In many ways they're right

[00:49:15] Because of its meteoric rise

[00:49:17] And because of the sheer proliferation

[00:49:19] And acceptance of this product

[00:49:21] However, now I'm speculating

[00:49:23] I think if the government is being smart

[00:49:28] They have a much grander vision today

[00:49:31] Not in 2016 but today for UPI

[00:49:34] Number one they've realized that

[00:49:36] It's easily accepted by everybody in India

[00:49:39] They've realized that such a utility

[00:49:41] Doesn't exist abroad

[00:49:42] Because in most developed countries

[00:49:44] There will be pushback from the banks

[00:49:46] To develop something like this

[00:49:47] Because it will eat into their own profits

[00:49:49] Even when they are into payments

[00:49:51] And so they hope

[00:49:54] By offering this in Singapore

[00:49:56] By offering this in Dubai

[00:49:57] Maybe doing it in Bangladesh tomorrow

[00:49:59] You know, wherever, Nepal

[00:50:00] Take your pick and stall

[00:50:02] That they will now create

[00:50:03] India's own international network

[00:50:06] Which could start rivaling Mastercard and Visa

[00:50:10] And unlike Mastercard and Visa

[00:50:12] Who pretty much only play in the

[00:50:14] Debit and credit card space

[00:50:16] These guys can allow direct bank to bank transfers

[00:50:20] Right?

[00:50:21] So it has the likelihood

[00:50:24] Of being a much more ubiquitous network

[00:50:26] That's number one

[00:50:27] Number two, I want to just go back a few years

[00:50:30] In 2014 when Russia invaded Crimea

[00:50:35] The US decided to impose sanctions on Russia

[00:50:38] What was the first thing they do?

[00:50:40] They told Mastercard and Visa shutdown

[00:50:42] The whole of Russia

[00:50:44] Imagine the entire country

[00:50:46] More than 120 million people

[00:50:48] Could not use a single card anywhere

[00:50:50] Not even in the ATM

[00:50:52] Not even in the ATM

[00:50:53] Right?

[00:50:54] So there's complete chaos and pandemonium

[00:50:56] I'm not trying to defend Russia

[00:50:58] But I'm just talking about

[00:51:00] Your sovereign right as a nation

[00:51:02] I think that's the kind of thing

[00:51:04] That would put an idea into India's head

[00:51:06] Saying we never want to be beholden

[00:51:08] To any foreign network

[00:51:10] Not because we'll ever be sanctioned

[00:51:12] By the United States tomorrow

[00:51:14] But why shouldn't we build our own?

[00:51:16] Exactly

[00:51:17] And once you build your own

[00:51:18] Then you can pretty much

[00:51:20] It doesn't matter

[00:51:21] And I tell you, I personally have a feeling

[00:51:23] And if the government of India is smart

[00:51:25] To do this

[00:51:26] Tomorrow you will start getting

[00:51:28] Credit and debit cards

[00:51:30] Where you will have Mastercard

[00:51:32] Or Visa, the badge

[00:51:33] And you will have another badge

[00:51:35] Which says rupee

[00:51:36] Ohhhh

[00:51:37] And it will be up to the merchant

[00:51:39] To determine

[00:51:40] Should I settle through Visa Mastercard

[00:51:42] Or should I settle through rupee

[00:51:44] And if rupee is cheaper

[00:51:46] No guesses about where

[00:51:48] This will go

[00:51:49] And eventually that would reduce

[00:51:51] Our dependence as an economy

[00:51:53] As well

[00:51:54] Total

[00:51:55] Total

[00:51:56] Total dependence

[00:51:57] Now that comes to the third point

[00:51:58] It's a great point you bring up

[00:52:00] What is CBDC?

[00:52:03] By itself it's nonsense

[00:52:06] But

[00:52:07] If you want to reduce your dollar dependence

[00:52:10] And you want to settle directly

[00:52:14] The wider you have

[00:52:16] A UPI network

[00:52:17] Remember I am not thinking now

[00:52:19] Of UPI as a way to pay people

[00:52:21] I am now thinking about it as a network

[00:52:23] As a payment rail

[00:52:25] Right

[00:52:26] Just like Mastercard

[00:52:28] And Visa and Venmo

[00:52:30] Abroad

[00:52:31] Allow crypto currencies

[00:52:32] Tomorrow UPI can allow

[00:52:34] CBDC

[00:52:35] E-Ruby

[00:52:36] CBDC for our listeners

[00:52:38] We don't know it's Central Bank digital currency

[00:52:40] Central Bank digital currency

[00:52:41] Which is just a digital form

[00:52:42] Of the Indian rupee

[00:52:44] Then all of a sudden

[00:52:45] UPI becomes the rails

[00:52:47] For people to start settling

[00:52:49] In our currency directly

[00:52:51] And there's going to be no question of

[00:52:53] A forex charge

[00:52:55] No question of converting to dollar

[00:52:57] To ruble or whatever

[00:52:59] As long as you have

[00:53:01] A corresponding bank there

[00:53:03] Who is willing to accept this

[00:53:04] Automatically you can settle

[00:53:06] So I personally think the government

[00:53:08] Has a larger vision

[00:53:10] Naturally you need to

[00:53:12] Plan and plot this

[00:53:14] So all of this are you saying that

[00:53:16] The government has this in their vision

[00:53:18] Are you saying these are the best practice

[00:53:20] That should have

[00:53:21] Now this is my

[00:53:22] I'm speculating

[00:53:23] I certainly hope they have this

[00:53:25] Because if they do not

[00:53:27] Then I have no idea why they're going

[00:53:29] Crazy with UPI

[00:53:30] Right

[00:53:31] Just as a payment utility

[00:53:33] We have discussed that it's

[00:53:34] As useful slash useless

[00:53:36] As others

[00:53:37] Right yes it's cheaper

[00:53:38] It's more accessible to everybody

[00:53:40] I accept all that

[00:53:42] But I think UPI can really

[00:53:44] Become the 300 pound gorilla

[00:53:46] On the face of the globe

[00:53:48] Forget India

[00:53:49] And it can really further

[00:53:51] India's ambitions

[00:53:52] To propel the UPI

[00:53:54] Into a basket of global currencies

[00:53:56] Right

[00:53:57] And allow certain states

[00:53:59] At least to settle in that currency

[00:54:01] Right so you're right

[00:54:02] The dollar dependence would go down

[00:54:03] It would also give us

[00:54:04] An independent network

[00:54:06] Right we would be

[00:54:07] Independent of Mastercard, Visa etc

[00:54:09] Exactly what Visa and Mastercard

[00:54:11] Were to the US

[00:54:12] Would become

[00:54:13] Rupay would become to

[00:54:15] Rupay Rupay and the UPI network

[00:54:17] Because imagine if you have a card

[00:54:19] Of some other utility like

[00:54:21] Actually I think cards are going out

[00:54:23] Of fashion it's all going to be

[00:54:25] The smartphone eventually right

[00:54:26] But what I mean is that

[00:54:28] Imagine if you can pay

[00:54:30] Through a credit line

[00:54:31] You can pay through your bank directly

[00:54:33] You can pay in E-Rupies

[00:54:35] You can pay through bank tokens

[00:54:37] It suddenly makes it

[00:54:39] A much more versatile

[00:54:41] Network compared to a lot of

[00:54:43] Networks right so

[00:54:45] When I say the E-Rupi

[00:54:47] The E-Rupi is really the digital form

[00:54:49] Of a rupee

[00:54:50] What you have in your bank

[00:54:52] Is not the digital form of a rupee

[00:54:54] It is not even a rupee

[00:54:56] So you need to think of the bank

[00:54:58] Like a casino

[00:54:59] I take money and I give it to them

[00:55:01] And they give me chips

[00:55:03] Right and those chips

[00:55:05] I can use on my credit card

[00:55:07] And debit card right

[00:55:09] Why because two banks

[00:55:11] Have agreed that on the back end

[00:55:12] They will actually transfer

[00:55:14] Rupee reserves

[00:55:15] But as far as we are concerned

[00:55:17] We are just seeing numbers

[00:55:18] It's a promise right

[00:55:20] It's a promise

[00:55:21] Even if you read on the cash

[00:55:23] It says I owe the bearer

[00:55:25] It's not

[00:55:26] That's it right

[00:55:27] That's what it is

[00:55:28] So it's not a real rupee

[00:55:29] But CBDC

[00:55:30] Again Central Bank Digital Currency

[00:55:32] The E-Rupi is really

[00:55:34] A digital form of the rupee

[00:55:36] It does not need to go

[00:55:38] Through a commercial bank

[00:55:40] It is to say that the reserve bank

[00:55:42] If it's so desires

[00:55:43] Can directly come to me

[00:55:45] And give me E-Rupi

[00:55:47] I don't need to go through a bank

[00:55:49] I don't need to go through HDFC

[00:55:51] Or ICICI etc

[00:55:53] So another thing that you mentioned

[00:55:55] Since we are talking about

[00:55:57] The government's

[00:55:58] You know

[00:55:59] The government's role

[00:56:00] In this other government's

[00:56:02] Idea of UPI

[00:56:04] Vision with UPI

[00:56:05] Like you said

[00:56:06] It is a great form of surveillance

[00:56:08] Also

[00:56:09] Right?

[00:56:10] I mean you can see

[00:56:11] Who is spending what and where

[00:56:13] You know

[00:56:14] The other day

[00:56:15] About a month ago

[00:56:16] Shakti Kanta Das

[00:56:18] The governor of the RBI

[00:56:19] Came out with this whole thing about

[00:56:21] Her

[00:56:22] Not her bar digital

[00:56:24] Her payment digital

[00:56:25] Okay

[00:56:26] I'm not sure that's a good thing

[00:56:28] Okay

[00:56:29] You know

[00:56:30] Every citizen

[00:56:31] Of every country in any part of the world

[00:56:33] Reserves and deserves the right

[00:56:36] To keep a certain level of privacy

[00:56:38] Yeah

[00:56:39] As long as I'm not selling drugs

[00:56:41] I'm not buying guns

[00:56:42] I'm not into some kind of terror financing

[00:56:44] The government and the banks

[00:56:47] And the tech companies

[00:56:49] Do not need to know everything I do

[00:56:51] Yeah

[00:56:52] So when I use a debit card

[00:56:54] And a credit card

[00:56:55] You are basically

[00:56:56] Paying rent to the financial system

[00:56:59] And you are allowing the financial system

[00:57:01] To see what you do

[00:57:02] Transactions

[00:57:03] When you use cryptocurrency

[00:57:05] You use all these wallets with UPI also

[00:57:08] Both the government and the tech firms

[00:57:10] Get to see what you're doing

[00:57:11] Right

[00:57:12] After a while

[00:57:13] You know it comes down to

[00:57:14] Where does this end?

[00:57:16] Because they don't want you to use cash

[00:57:19] Cash in many ways is a way

[00:57:21] To stay independent

[00:57:22] Yeah

[00:57:23] And it's actually bad for them as well

[00:57:25] It's bad for them

[00:57:26] Because they can't see

[00:57:27] They can't control

[00:57:28] Right

[00:57:29] Yeah

[00:57:30] You know a lot of people say

[00:57:31] You know mastercard

[00:57:32] Mastercard slogan

[00:57:33] Is a world without cash

[00:57:35] Do we really want a world without cash?

[00:57:37] Do we believe that if cash disappears

[00:57:39] And everything is electronic

[00:57:40] That that system cannot be hacked

[00:57:42] That the system cannot go down

[00:57:44] Imagine a day

[00:57:45] When it's all digital

[00:57:46] And the system goes down

[00:57:47] How will you make a payment?

[00:57:49] Yeah

[00:57:50] Or the example that you gave

[00:57:51] About the Russia sanctions

[00:57:53] Correct

[00:57:54] Somebody kills the switch

[00:57:56] Destroys the switch

[00:57:57] The payment switches

[00:57:58] What happens

[00:58:00] Right

[00:58:01] You always want cash

[00:58:03] Because cash after all

[00:58:05] Is a bonus fee day currency

[00:58:07] It is the fiat currency of the land

[00:58:09] Nothing else is real currency

[00:58:12] And it's the most basic that you can

[00:58:14] Get right

[00:58:15] Actually handing somebody

[00:58:17] Down money in their hands

[00:58:18] That is correct

[00:58:19] And it is the only thing you own

[00:58:21] The moment you put it into the bank

[00:58:23] You stop owning it

[00:58:24] You're hoping

[00:58:25] You're hoping that it's there

[00:58:27] That tomorrow the bank doesn't say

[00:58:28] Sorry we are shutting shop

[00:58:29] You're hoping

[00:58:30] Right

[00:58:31] But the point is

[00:58:32] It's not like it's not happening

[00:58:34] Any number of times

[00:58:35] Exactly

[00:58:36] So it is important

[00:58:38] We need to allow for choice

[00:58:40] Right

[00:58:41] I think cash has its place

[00:58:43] UPI has its place

[00:58:44] Electronic forms of payment

[00:58:46] Have their place

[00:58:47] But I don't think we should go

[00:58:49] Purely digital

[00:58:50] I don't agree with that

[00:58:51] So what do you think

[00:58:53] Have countries

[00:58:55] The more developed countries like the US

[00:58:57] What are the price that they have paid

[00:58:59] For going

[00:59:00] You know

[00:59:01] So cashless

[00:59:02] No so I must say

[00:59:04] I must tell you

[00:59:05] Unless things have changed

[00:59:06] Very much in the last three years

[00:59:08] And I doubt it

[00:59:10] Cash still makes up a third

[00:59:12] Of all payments in the United States

[00:59:15] And a third of spending

[00:59:17] In the US

[00:59:18] Is probably larger than

[00:59:19] All the spending in India

[00:59:21] Just the sheer value

[00:59:23] Right

[00:59:24] So check and cash

[00:59:26] Right

[00:59:27] And they're pretty much interchangeable

[00:59:29] Make up about 35%

[00:59:30] And the rest is obviously digital

[00:59:32] Right

[00:59:33] Credit cards, debit cards

[00:59:34] Wallets, Apple pay

[00:59:35] You name it right

[00:59:36] The price they have paid is

[00:59:38] That after a while

[00:59:40] Everybody knows exactly

[00:59:42] What you spend on

[00:59:43] Yeah

[00:59:45] Everything

[00:59:46] Right

[00:59:47] And to the extent that

[00:59:49] They have gone used to that system

[00:59:51] And if that system collapses

[00:59:53] There will be a real problem

[00:59:55] Right

[00:59:56] So let me explain

[00:59:57] Fractional reserve lending

[00:59:59] Means that the same 100 rupee note

[01:00:02] Is in two places at the same time

[01:00:04] What does that mean?

[01:00:05] I think it's in my bank

[01:00:07] And I can withdraw it

[01:00:08] And the bank thinks

[01:00:10] That it's actually been lent to

[01:00:12] Anjali

[01:00:13] Because Anjali went to buy something

[01:00:14] The same 100 rupee note

[01:00:15] Has been lent out

[01:00:16] And I'm thinking it's in my bank

[01:00:17] Right

[01:00:18] So it is a confidence trick

[01:00:20] What is a confidence trick

[01:00:21] The bank thinks

[01:00:22] Anjali will not come to a deal

[01:00:23] The bank thinks Anjali will not come to withdraw the money today

[01:00:26] So let me lend it to you

[01:00:27] Exactly

[01:00:28] This was a joke that a few of my friends

[01:00:30] Are having that

[01:00:31] What if everybody in India decides

[01:00:34] I want my money back

[01:00:35] To withdraw money at the same time

[01:00:37] The entire banking system will collapse

[01:00:39] It will collapse overnight

[01:00:40] Forget it

[01:00:41] The Indian government will not let you do that

[01:00:43] They will post army javans there

[01:00:45] To stop you from

[01:00:46] No, no, don't laugh

[01:00:47] I'm serious

[01:00:48] They will stop it

[01:00:49] They cannot allow it

[01:00:50] The whole system will collapse

[01:00:51] Right

[01:00:52] So it's so in the US also

[01:00:55] People have forgotten the basic essence of saving

[01:01:00] They spend and they spend

[01:01:02] And they spend, right

[01:01:04] And until such time as the dollar

[01:01:07] Is the world's reserve currency

[01:01:09] They have a cushion

[01:01:10] Right

[01:01:11] But I think that is now being severely challenged

[01:01:14] I think even the Federal Reserve

[01:01:16] Has come to a point

[01:01:18] Where they realize that there's too much money

[01:01:21] Floating out there

[01:01:22] And as they keep ratcheting up the interest rate

[01:01:25] People will start spending less

[01:01:27] Because it's more profitable to keep money in the bank

[01:01:30] For the first time

[01:01:31] In at least two generations

[01:01:32] You can earn so much interest in a US bank

[01:01:35] So there are a lot of ups and downs to this

[01:01:39] There's no perfect solution

[01:01:40] But in India

[01:01:42] The vast majority of Indians

[01:01:44] Have never had the opportunity

[01:01:46] To spend anything of any value

[01:01:49] So I think as credit begins to proliferate

[01:01:53] Right

[01:01:54] I think there'll come a time when slowly

[01:01:57] Consumption as a factor of GDP

[01:02:00] Will begin to rise

[01:02:01] More and more meteorically

[01:02:03] And eventually no country becomes rich

[01:02:07] Until its consumers are willing to spend

[01:02:10] And if you ask me

[01:02:12] Willing to spend at least 60 to 65%

[01:02:15] Of what they earn

[01:02:17] And India is very far away from that today

[01:02:19] Very, very far away

[01:02:20] So there's a lot of scope to expand and grow

[01:02:23] And I think in the next decade

[01:02:25] As everybody keeps telling us

[01:02:27] It'll be India's decade

[01:02:29] We still need to navigate it cautiously

[01:02:32] We cannot be crazy about the way we try to grow

[01:02:35] But I think yes

[01:02:37] I think there will be financial inclusion

[01:02:39] We'll find more and more people coming out

[01:02:41] Real financial inclusion

[01:02:43] Not just getting more

[01:02:45] Not just the lip service

[01:02:47] I made a wallet available to everybody

[01:02:50] Great, so how does that help anybody

[01:02:52] So that's the...

[01:02:53] I agree

[01:02:54] So that's how it works

[01:02:55] And it's interesting how something so basic

[01:02:58] Sounding like UPI can actually be the centre of

[01:03:01] Such a big shift

[01:03:03] Such a big financial revolution

[01:03:06] Essentially right

[01:03:07] Interesting

[01:03:08] You know when you think of it in theory

[01:03:10] It feels like why wasn't it thought of before

[01:03:13] Because it sounds so simple

[01:03:14] You're like...

[01:03:16] I agree

[01:03:17] I agree

[01:03:18] I mean why did Paytm come about?

[01:03:20] Paytm, so if you think about

[01:03:22] IMPS and NEFT and all the rest of it

[01:03:25] Banks also had this long before Paytm was thought of

[01:03:28] But banks again didn't care

[01:03:30] Half the time

[01:03:31] You were trying to get an OTP

[01:03:32] The OTP didn't come

[01:03:34] Very often there was a lot of fraud in between

[01:03:36] Because you were waiting

[01:03:37] So Paytm came and told people

[01:03:38] I'll take care of everything

[01:03:39] Don't worry

[01:03:40] There'll be no failure

[01:03:41] The failure rate will be 1 in a million

[01:03:43] You'll always get the OTP

[01:03:44] And once you've paid me

[01:03:45] I undertake to pay the merchant

[01:03:47] You don't need to worry

[01:03:48] You'll always get your goods on time

[01:03:49] Whatever you're purchasing etc

[01:03:51] So Paytm was actually filling a gap

[01:03:53] That the banks had essentially deserted

[01:03:57] And then on the back of Paytm

[01:03:59] Is where something like UPI came

[01:04:01] UPI because

[01:04:02] Eventually Paytm is a private company

[01:04:05] The government wanted to...

[01:04:06] See because even for Paytm

[01:04:08] Paytm didn't want to go into the rule areas

[01:04:11] Why would it go to the rule areas?

[01:04:12] They don't have money

[01:04:13] They don't have any money

[01:04:14] How are they going to fill that wallet?

[01:04:16] So now comes UPI

[01:04:18] And you had basically the

[01:04:21] ABPS which is

[01:04:23] That Adhaar Payment Bridge system

[01:04:25] By which the government

[01:04:26] Pretty much gives subsidies

[01:04:28] To people directly

[01:04:29] And so now there was an automatic way

[01:04:31] By which that could be used

[01:04:33] Without those people having to go

[01:04:35] To a money lender

[01:04:37] Or to some bank correspondent

[01:04:39] Or to an ATM to withdraw money

[01:04:41] I've got it here

[01:04:43] Now I can automatically invoke that

[01:04:45] And make a purchase at a merchant

[01:04:47] Who accepts UPI

[01:04:48] Nice

[01:04:49] So I think this was an amazing chat

[01:04:52] Till now we've a lot of our

[01:04:54] Ideas that we had

[01:04:56] And even our listeners I'm sure would be having

[01:04:58] Have gotten some perspective

[01:05:00] Now to close

[01:05:02] We want to like discuss a theory

[01:05:04] That essentially

[01:05:06] We started our conversation

[01:05:08] Like this is how we started

[01:05:10] Developing this thing

[01:05:12] Because both of us think

[01:05:14] That

[01:05:16] And we want to ask you this

[01:05:17] That is UPI then just another

[01:05:19] Startup

[01:05:21] Which might bust

[01:05:23] If you look at some signs

[01:05:25] Just the way that it has been

[01:05:27] Distributing these

[01:05:29] Very attractive

[01:05:31] Cashback offers right at the start

[01:05:33] Now it's declining

[01:05:35] From nowhere

[01:05:37] In line with the digital

[01:05:39] Georevolution

[01:05:41] Very very thin revenue streams

[01:05:43] Not making any money

[01:05:44] Just resembles every other start up

[01:05:46] So how close are we to the truth?

[01:05:48] So you know I think

[01:05:50] We need to think of

[01:05:52] UPI

[01:05:54] I'm just trying to give you an analogy

[01:05:56] We need to think, just imagine

[01:05:58] UPI

[01:06:00] Is a railway track

[01:06:02] So imagine a future

[01:06:04] Government owns all the railway tracks

[01:06:06] The government owns all the stations

[01:06:08] Okay

[01:06:10] But the government does not own the trains

[01:06:12] The government is not in the business of carrying

[01:06:14] Either passengers or cargo right

[01:06:16] Those are all private entities doing whatever they need to do

[01:06:18] Including public sector units

[01:06:20] But the government is not involved

[01:06:22] We need to think of UPI like that

[01:06:24] So the government has created these

[01:06:26] Rails, payment rails

[01:06:28] The government has created a kind of interface

[01:06:31] Think of the interface as a kind of

[01:06:33] A way to take it window

[01:06:35] For want of a better, I'm just making it up

[01:06:37] But all the players

[01:06:39] Who are buying and selling are private

[01:06:41] Okay

[01:06:43] So the government has created the rails

[01:06:45] Why? Because it wants people to be able to

[01:06:47] Move around India

[01:06:49] It wants goods to be able to go to every corner

[01:06:51] Of India

[01:06:53] Right now the government is saying

[01:06:55] Because I want everybody to use this service

[01:06:57] It's free, just don't destroy the rails

[01:06:59] And make sure that whatever promise

[01:07:01] You are making to either side is kept

[01:07:03] And make sure

[01:07:05] Whatever train that starts from A station

[01:07:07] Reaches the other station

[01:07:09] People get there safely

[01:07:11] There's no defrauding of people etc

[01:07:13] I've built this entire system

[01:07:15] Right, so in that sense

[01:07:17] It's not a startup, however

[01:07:19] It is expensive

[01:07:21] There is a cost to maintaining this

[01:07:23] And yes, NPCI is a not for profit entity

[01:07:25] But the government

[01:07:27] Is definitely sponsoring this

[01:07:29] Right, but it's a great utility

[01:07:31] Like the railways, it's a great utility

[01:07:33] So now it comes down to

[01:07:35] At some point in the future

[01:07:37] The government will probably start charging

[01:07:39] A small amount

[01:07:41] Every time you come to a station

[01:07:43] Or stop at a station

[01:07:45] For every transaction

[01:07:47] You pay me 2 paisa, 3 paisa on the thing

[01:07:49] So that the government

[01:07:51] Can maintain this system

[01:07:53] Because I'll tell you as

[01:07:55] As UPI grows

[01:07:57] 4 things the government needs to take care of

[01:07:59] One is security

[01:08:01] No matter how secure you are today

[01:08:03] The hackers will figure out

[01:08:05] How to hack, because it's the same guys

[01:08:07] Who are writing your security code

[01:08:09] The other side the same guys are hacking

[01:08:11] So you need to constantly

[01:08:13] Invest in security

[01:08:15] It's not cheap

[01:08:17] So you need money to invest in security

[01:08:19] It's very very important

[01:08:21] And that is the government's responsibility

[01:08:23] To do that

[01:08:25] If you own the rails

[01:08:27] Remember the wallet will create its own security

[01:08:29] But you also need to have

[01:08:31] Security on the track

[01:08:33] Number one

[01:08:35] Number two

[01:08:37] Seamlessness

[01:08:39] Today we think it's absolutely seamless

[01:08:41] Tomorrow with android

[01:08:43] And apple and whoever else

[01:08:45] Tomorrow we may not even be using mobile phones

[01:08:47] It may be some other type of device

[01:08:49] Who knows

[01:08:51] Today I think there are issues of transaction

[01:08:53] Drops and all of that

[01:08:55] Correct a lot of this

[01:08:57] Which is why they've come out with UPI light

[01:08:59] Which says that regardless of transaction

[01:09:01] Drops up to 200 rupees I'll allow

[01:09:03] So keeping up with this whole concept

[01:09:05] Of convenience and seamlessness

[01:09:07] Means you need to keep investing in technology

[01:09:09] To keep it modern

[01:09:11] Not just for India because as I said

[01:09:13] The government has international ambitions

[01:09:15] UPI has also gone global

[01:09:17] Number three

[01:09:19] Process improvement

[01:09:21] Now it is saying you can also add rupee

[01:09:23] You can also have some pre-approved loans

[01:09:25] Which can be offered

[01:09:27] So there could be a lot of adjacencies

[01:09:29] So making it as nimble

[01:09:31] As flexible

[01:09:33] Process improvement to ensure this is very important

[01:09:35] Again it takes huge investments

[01:09:37] And I think the third is cost effectiveness

[01:09:39] So the best way to keep it cost effective

[01:09:41] Is to have the largest number of users

[01:09:43] Using the largest number of aspects

[01:09:45] Because then the cost per transaction

[01:09:47] Comes down to the cost per transaction

[01:09:49] Because then the cost per transaction

[01:09:51] Comes down to nothing

[01:09:53] So it's a factor of these four things

[01:09:55] That the government has to invest in

[01:09:57] The government knows it

[01:09:59] It's not that the government does not know it

[01:10:01] I'm not saying anything that is particularly insightful

[01:10:03] And these are the reasons why

[01:10:05] It's not a start up

[01:10:07] Look a start up wants to exit

[01:10:09] The government does not want to exit

[01:10:11] Neither does it want to sell

[01:10:13] At least it should

[01:10:15] That's not going to happen

[01:10:17] So the government is not giving away freebies

[01:10:19] All the government has done

[01:10:21] Is it has brought down zero MDR

[01:10:23] But that has no impact on the government

[01:10:25] The government has actually punished

[01:10:27] The private players in one sense

[01:10:29] But the government doesn't bear that cost

[01:10:31] To an extent

[01:10:33] So it's not really a start up

[01:10:35] But it has to invest

[01:10:37] Like a start up

[01:10:39] Right

[01:10:41] For it to continue to be relevant

[01:10:43] For it to continue to be cost effective

[01:10:45] For it to continue to be attractive

[01:10:47] To both domestic and international users

[01:10:49] Both retail as well as

[01:10:51] Business users over a period of time

[01:10:53] It needs to invest heavily in this

[01:10:55] Because if it does not

[01:10:59] It has everything

[01:11:01] To

[01:11:03] How do I put this? To lose

[01:11:05] The government needs

[01:11:07] To do very little to win

[01:11:09] It's winning anyway with you

[01:11:11] It has everything to lose

[01:11:13] It slows down the pace of investment

[01:11:15] If it slows down the pace of expansion

[01:11:17] If it somehow stops dead

[01:11:19] Its vision saying we won't do this

[01:11:21] We won't do that

[01:11:23] Eventually others will begin to challenge

[01:11:25] Or I would even assume

[01:11:27] Even if it stays limited to just payments

[01:11:29] After a while it will become

[01:11:31] A non entity

[01:11:33] So it will be foolish to do that

[01:11:35] I think the government does have a winner

[01:11:37] I think beyond

[01:11:39] Their wildest expectations

[01:11:41] I think the government

[01:11:43] Needs to methodically plan

[01:11:45] What it wants to do

[01:11:47] Prioritize some of those initiatives

[01:11:49] And make sure over the next 5-10 years

[01:11:51] It invests judiciously

[01:11:53] I think that's critical

[01:11:57] But eventually does

[01:11:59] UPN need to be profitable

[01:12:01] Or just enough to sustain itself

[01:12:03] Or does it need to turn in

[01:12:05] That's a government call

[01:12:07] I'll be honest

[01:12:09] Right now NPCI also is not for profit

[01:12:11] Yes the government at some point

[01:12:13] Will want to make sure that

[01:12:15] Whatever investments it puts in

[01:12:17] It is earning back, at least

[01:12:19] Eventually does the government want this

[01:12:21] To be a hugely profitable entity

[01:12:23] Perhaps

[01:12:25] Like the railways

[01:12:27] India is the only country in the world

[01:12:29] Where cargo subsidizes passenger

[01:12:31] In every other part of the world

[01:12:33] Passenger subsidizes cargo

[01:12:35] So these kind of topsy-turvy

[01:12:37] Things sometimes mess up the overall profitability

[01:12:39] Not to talk about corruption

[01:12:41] The level of our corruption

[01:12:43] Is as large as our proliferation of UPI

[01:12:45] Right so

[01:12:47] But having said that

[01:12:49] I think we've got a winner here

[01:12:51] It's a utility

[01:12:53] We've got our headlines

[01:12:55] UPI is utility

[01:12:57] UPI is like a railways

[01:13:01] Do you like talking about

[01:13:03] UPI in general

[01:13:05] Like a UPI nerd

[01:13:07] I'm not a UPI nerd

[01:13:09] But I follow payments very closely

[01:13:11] Both, I continue to follow

[01:13:13] Payments very closely both in India

[01:13:15] Actually that is one thing I was very interested

[01:13:17] In knowing because you exited

[01:13:19] The banking sector a while back

[01:13:21] But you still ride

[01:13:23] So

[01:13:25] I still ride extensively

[01:13:27] So one

[01:13:29] Not that it's a big difference

[01:13:31] But when you're in a bank

[01:13:33] You cannot afford not to make profits

[01:13:35] So unlike most other

[01:13:37] Payment companies in India

[01:13:39] I did not have the luxury to make losses

[01:13:41] So I tend to be a little more conservative

[01:13:43] In my approach and trying to understand

[01:13:45] What is the business model

[01:13:47] I'm just being very honest

[01:13:49] And so I continue to question

[01:13:51] Some of the business models that exist

[01:13:53] Some of the things that people are touting

[01:13:55] As we can do this and we can do that

[01:13:57] And I've always been interested

[01:13:59] In payments, banking, finance

[01:14:01] E-commerce, privacy

[01:14:03] So I continue to write about all of this

[01:14:05] Because I really think that these are

[01:14:07] Some of the driving forces of our age

[01:14:09] That will determine what our future looks like

[01:14:11] And I think that's the reason

[01:14:13] This really interests me

[01:14:15] And also it's because something

[01:14:17] It's something that literally everyone uses

[01:14:19] There's not one person

[01:14:21] Who is alienated in the system

[01:14:23] Absolutely

[01:14:25] Everybody uses this

[01:14:27] But do people

[01:14:29] I mean do you feel that they use it

[01:14:31] But not understand it enough

[01:14:33] Or do they understand it just enough

[01:14:35] That as they showed

[01:14:37] To be fair

[01:14:39] When you and I take

[01:14:41] A parasetter model

[01:14:43] We never read what is a chemical

[01:14:45] We don't care, doctor said

[01:14:47] Okay, pop it and knock it back

[01:14:49] So for a lot of people

[01:14:51] It needs to work

[01:14:53] And it needs to be affordable

[01:14:55] So if it works, if it is affordable

[01:14:57] It's not a security risk

[01:14:59] For most people that is reason enough

[01:15:01] To use it

[01:15:03] And I think that's what we have to be honest

[01:15:05] It should be

[01:15:07] They don't have to be clued into how it

[01:15:09] What is a mechanic

[01:15:11] Is it really want to know they can just listen to our podcast

[01:15:13] That's true

[01:15:15] That's so very true

[01:15:17] Thank you, thanks a lot for this chat

[01:15:19] No, thank you so much

[01:15:21] Thank you, take care

[01:15:23] Bye

[01:15:31] Okay, thank you Ateesh

[01:15:33] For this conversation

[01:15:35] It was really nice, I mean

[01:15:37] I had a lot of my questions answered

[01:15:39] Yeah, yeah, 100%

[01:15:41] Would you consider

[01:15:43] That this conversation was worth the money

[01:15:47] Of course it was

[01:15:49] But I'm still reeling from the analogy

[01:15:51] And how perfectly it fits

[01:15:53] Everything

[01:15:55] The real analogy, yes

[01:15:57] But the more similarities you'll find

[01:15:59] And I love such analogies

[01:16:01] Exactly, yeah

[01:16:03] I love analogies as well

[01:16:05] And he talked about the four things

[01:16:07] That the government should do

[01:16:09] Making sure that the transaction is secure

[01:16:11] That is

[01:16:13] That no train is stopped on track

[01:16:15] Then making sure that it is seamless

[01:16:17] That if the bullet train is coming

[01:16:19] Then you should have a bullet train

[01:16:21] Yeah

[01:16:23] That it can be used for

[01:16:25] For people and as many different kinds of

[01:16:27] You know transactions

[01:16:29] Which is the same track

[01:16:31] Should be used for a cargo

[01:16:33] As well as a passenger, as well as a bullet train

[01:16:35] So this is so interesting

[01:16:37] To simplify such a

[01:16:39] Complex seeming topic

[01:16:41] For noobs like us

[01:16:43] What are some of the

[01:16:45] Biggest things that

[01:16:47] Got cleared for you after this conversation

[01:16:49] About UBS?

[01:16:51] Some of my biggest questions were a lot

[01:16:53] About I was very curious to know

[01:16:55] What is the government doing

[01:16:57] Here

[01:16:59] What is it doing and why is it doing

[01:17:01] But the way that he explained

[01:17:03] The various

[01:17:05] Bigger plans

[01:17:07] That he thinks that the government has

[01:17:09] Or should have

[01:17:11] Dude if that happens

[01:17:13] Whatever he is saying

[01:17:15] If all of that actually happens

[01:17:17] We will become a great Vishwaguru

[01:17:19] Because

[01:17:21] The biggest problems when it comes to

[01:17:23] The

[01:17:25] Economy in general

[01:17:27] Is because of our foreign exchange

[01:17:29] Reserves being a dollar

[01:17:31] Yeah dude

[01:17:33] Tell me about it, there have been

[01:17:35] People, YouTubers

[01:17:37] Who I am a fan of

[01:17:39] There are rappers who I am a fan of

[01:17:41] Who I have tweeted that dude

[01:17:43] I am so sorry I can't buy or merge

[01:17:45] Because the conversion rate is so much

[01:17:47] Yeah

[01:17:49] It's so interesting to think that something

[01:17:51] As small as UPI can

[01:17:53] Be the starting point for that

[01:17:55] Bigger change

[01:17:57] Like you said like a revolution

[01:17:59] And it can be such a

[01:18:01] It can serve such a

[01:18:03] Large range of people

[01:18:05] So even the one with the gully

[01:18:07] Can increase their sales

[01:18:09] And the whole country can

[01:18:11] Spark an economic revolution

[01:18:13] Because of the same

[01:18:15] Mechanism and the same train track

[01:18:17] For me I think one

[01:18:19] Question and one query

[01:18:21] That I have always had

[01:18:23] Was the nature of

[01:18:25] NPCI itself

[01:18:27] And how that makes money

[01:18:29] And what is its role in all this

[01:18:31] Is it just as he said

[01:18:33] As he clarified for us that it's a non-profit

[01:18:35] And we used to think

[01:18:37] Initially that it was a private entity

[01:18:39] And a lot of people still do that

[01:18:41] Still think that it's a private entity

[01:18:43] But it comes under the umbrella

[01:18:45] So that really

[01:18:47] That really put a lot of things

[01:18:49] In perspective for me when it comes to

[01:18:51] The role of NPCI as an entity

[01:18:53] When it comes to controlling and maintaining

[01:18:55] This UPI train track

[01:18:57] I am

[01:18:59] Always going to refer to UPI

[01:19:01] As a train track

[01:19:03] It's the new AI is a parrot

[01:19:05] If you didn't get that

[01:19:07] Reference check out the first episode

[01:19:09] Of the big story with

[01:19:11] Shamim and Nanupam

[01:19:13] And it was also

[01:19:15] Interesting for me

[01:19:17] Was the journey

[01:19:19] From let's say

[01:19:21] Your credit card, debit card, net banking

[01:19:23] To UPI has a very big role

[01:19:25] Of Paytm in the middle

[01:19:27] And that he really clarified

[01:19:29] For us in the absence of Paytm

[01:19:31] Something like UPI would have been

[01:19:33] Much more difficult

[01:19:35] To be even adopted

[01:19:37] Because Paytm got people used

[01:19:39] To digital transactions

[01:19:41] That happen the way that they do

[01:19:43] With UPI

[01:19:45] And even now as he said

[01:19:47] That Paytm still continues to be

[01:19:49] One of the biggest

[01:19:51] Merchants

[01:19:53] Not merchants but one of the biggest companies

[01:19:55] That is empowering and spreading

[01:19:57] Along with

[01:19:59] The logo changed

[01:20:01] You know Paytm's logo now says

[01:20:03] UPI

[01:20:05] It used to be just Paytm

[01:20:07] I hope that song

[01:20:09] Doesn't change that I really like that song

[01:20:11] Paytm

[01:20:13] Justine Royle

[01:20:15] Nice interesting

[01:20:17] So guys you

[01:20:19] Let us know if you like this conversation

[01:20:21] With Ateesh and

[01:20:23] I think

[01:20:25] Send some love his way

[01:20:27] To really break down this

[01:20:29] Such a complex thing

[01:20:31] And a very ununderstood

[01:20:33] I won't even say misunderstood

[01:20:35] Thing of UPI

[01:20:37] What is going on

[01:20:39] But it seems like for the longest

[01:20:41] Time we used to think Google Pay is UPI

[01:20:43] But then Paytm came with UPI

[01:20:45] And said oh okay

[01:20:47] Anyone can use it

[01:20:49] So I think

[01:20:51] That was this episode of the big story

[01:20:53] We hope you enjoyed it

[01:20:55] Yes we will be back

[01:20:57] On the

[01:20:59] 15th of May

[01:21:01] By the way do you remember the date

[01:21:03] First and 15th of every month

[01:21:05] Write it down

[01:21:07] Write it down mark your calendar

[01:21:09] All the things you need to do

[01:21:11] And remind us too

[01:21:13] Nice

[01:21:15] So that was this episode of the big story

[01:21:17] Thank you so much for tuning in

[01:21:19] This was Prateek

[01:21:21] And this was Anjali and we will see you in the next one

[01:21:38] Music from BMG