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Comment by egghese | Hacker News Reader

UPI is an impressive system, I use it often and it is quite empowering for billions of Indians.

But calling it the "best payment system in the world"! And west wants it so bad sounds like blind exaggerations.

United States is not the only western country. Scandinavian countries has Swish (2012), Vipps (2013), and Mobile pay (2015), Canada has Interac.

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Not interested on flamewars here. Reading this thread it looks like merits of system is upon peoples arbitrary metrics based on varying perspectives. So a constructive discussion is not going to happen.

So until there is some standardised comparison probably making any statements about merits or demerits, including mine are just opinions without facts.

Comparing payment systems is obviously not easy.

However, I've spent a lot of time studying the payments space (7+ years now!) and I'll quickly give you 3 reasons why UPI is "better" than Interrac for example :

1) Better User Experience

Systems like Interrac enable instant bank to bank transfers. However, they don't allow for third party applications to initiate payment requests / view balances. Customers are restricted to choosing a bank and sticking with the user experience defined by the bankers.

UPI , on the other hand, mandates banks to accept and honor payment requests generated from "Third-party payment application providers (TPAPs)"

This allows for a much larger variety of payment experiences to be designed, which can be "fit on top" of the existing banking layer.

PSD2 regulations, in Europe tried to achieve this effect, however most banks ended up implementing a custom version of the protocol instead of adoption a common standard.

2) Lower costs

Adoption of the UPI payments system has massively reduced the cost of sending money anywhere across India.

For Indian banks, the cost of sending money via UPI is wayy less than the "Gas fees" required to facilitate crypto transactions or the fees charged by VISA/MC networks to facilitate transactions.

Similarly, costs for a merchant to accept UPI payments are much lesser than accepting any other form of digital payment today (in India and maybe the world).

3) Federated Architecture

From Day-1, the UPI ecosystem has been design to support multiple switch providers, payment institutions and local regulations.

If countries like France, adopt UPI, they won't have to depend on centralized servers hosted in India to run their payments technology.

All their data can be hosted in servers within the country and the UPI instance facilitating French transactions can be tailored to honor local regulations and limits.

This flexibility is not as easy to implement with older payment systems (like VISA/MC).

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Much of this can also be attributed to the fact that the other payment systems were developed 15+ years ago.

The recently launched, FedNow system adopts a similar approach to UPI. Will be interesting to see how it evolves

https://www.youtube.com/watch?v=obbpLGVoVxI

I would love to see similar public-private consortium systems in rest of the west like Germany, Spain, France and Australia etc. Until then I’ll consider UPI to be superior to those in the west.

is it really that different from SEPA though?

I’ve never done an instantaneous SEPA transfer just scanning a QR code. Is that possible?

I think there is a standard, so as long your bank’s app supports it and more importantly the merchant actually provides a QR code to scan (which is unlikely).

Then again, I don’t see much need for that when I can just NFC pretty much everywhere (of course the merchant still ends up paying up to 1% on every transaction)

Others have the system but is it as good and seamless as the Indian one?

Tapping my phone on an NFC terminal seems much easier and more straightforward than having to scan a QR or install a third party app and having to figure out how to link it with my bank account. There is just probably not a lot of demand for a system like this in much of the west (in cases where you can’t use a card there is always SEPA instant payments)

The QR code has been a far more robust system for the Indian ecosystem which is predominantly filled with low-cost phones of widely different operating systems. A QR code also behaves as a readily identifiable logo of payment and further works from a distance. If anything I prefer the deliberateness of scanning a QR code, clearly similar to half a billion people at the least.

I’ve used both and I prefer NFC over UPI. I just need credit card and phone that supports NFC. No need of phone number, deal with entering pin, scanning QR code, linking account during setup, etc. Biggest plus point with linking credit card is fraud protection.

In US NFC is best and seamless since most people have high end phones. In India maybe UPI with QR code is better solution since you only need phone with a camera.

Depends on what you mean. Instant transfers up to €100k work in Europe's SEPA (and you can indeed use a QR to encode the transfer information with most bank apps, I think). And there is of course the usual contact-less payment stuff at merchants.

That's still not as easy as app payments. There are a number of systems like BLIK in Poland where you have a lower max payment amount, but you just give somebody a temporary 6 digit number and approve the amount they withdraw, that's it. For trusted payment channels you just approve. If you initiate the payment, just give phone number of recipient.

Agreed, but I think for places with a mature payments and debit infrastructure there isn't that much additional business and I suspect most banks' apps will just incorporate that like they do with NFC payments.

Most growth in payments is either new markets or markets that grow a lot, but not completion of rather mature markets (and additional services).

When you compare UPI to western instant payment systems, the most important metrics to look at are consumer choice (banks and experience apps), cost of acceptance, settlement speed and fraud/clawback rates. UPI has broadest interop based consumer choice, free to consumers and lowest cost overall, highest volume of transactions, has fastest settlement and extremely minimal fraud. It is also most inclusive – it works with smartphones, feature phones and soon with only voice calls. It also works offline. And it works for everything from buying a cup of coffee to sending money to your grandma to doing investments in mutual funds and stocks and making large purchases like buying a car.

Swish has 3 ways:

1: You follow a link on your phone that opens the app, you're prompted with the transaction sum and then sign with a code on the phone and done.

2: You scan a QR code (from sign or screen), opens a prompt in app for the sum, sign and done

3: Person-to-person, you enter their phone number(often from the phone book), amount and message, sign and done.

The signing is done via the standard app that's also used to login to the tax-office,etc so the entire population has it.

Just remember that all else being equal, UPI is still a far more impressive system. Here’s the reasons:

1. A 100x higher volume on a normal day.

2. A highly effective and equitable system that somehow managed to succeed in one of the most corrupt and beauracratic nations.

3. The majority of its users can barely read, if at all. Not to mention all the languages involved.

UPI is impressive because it actually made a difference in the lives of the poor. Probably the first piece of internet technology to have a measurable effect on the lives of hundreds of millions of people.

So yeah the case sounds rested in my perspective.

EDIT: also sounds like Swish charges a fee to the banks? Sounds a bit outrageous for a payment system trying to be the best in the world to charge a fee.

> EDIT: also sounds like Swish charges a fee to the banks? Sounds a bit outrageous for a payment system trying to be the best in the world to charge a fee.

FWIW, NPCI charges all banks for UPI too. They’ve been eating most of those costs because the government didn’t allow them to charge (now those charges are slowly coming in). Banks haven’t been happy with the zero MDR regime for UPI.

According to here: https://www.thehindubusinessline.com/money-and-banking/npci-...

Doesn’t apply for transactions less than ₹2000 ($24 usd). Might sound like a small amount but most Indian transactions won’t cross that. And the fee doesn’t apply to p2p anyway.

Well volume wasn't the question here (but yes, it's hard to beat anything Chinese or Indian w/o being global). As for literacy most illiterates should be able to use Swish.

Nr 2 though is something that I think might be a reverse though, looking globally mobile payments seems to have been a hit in markets with less well functioning traditional money and credit/debit card markets.

In Sweden cards's (most often debit) with tap-to-pay still rules for most b2c cases like established restaurants, stores and anything with slightly higher value. Swish was mostly started out to facilitate non-commercial person-to-person cases but has now displaced most lower value cash usage (person to person, small vendors, temporary venues).

I frankly don't even know if I have physical money in my wallet anymore since.. well I've not used physical money in a couple of years now iirc.

a lot more seamless. you just tap your credit card and that’s it.

This exists in India too. But people don't use it. Why take on debt if you don't need to?

UPI is directly connected to your bank account. It does not go through VISA, Mastercard or whatever.

How does UPI handle payment disputes? My impression is that the direct payment systems do not have chargebacks and are risky for anything that isn't immediate. What do you do if store won't give you return/refund for something broken? What do you if online store never ships? What if food stall doesn't give you your food?

With credit card, it isn't my money for a month until I have to make the payment. If there is a problem, I can chargeback. The possibility of chargeback makes the vendor's support more helpful

In this regard a UPI transaction is the same as a cash transaction. AFAICT it does not handle payment disputes. You can use a credit card if it provides protection against this but now you need to be sure the credit card company is not scamming you (say by charging you bogus fees). As far as I am concerned using a credit card changes nothing when it comes to fraud protection.

> Why take on debt if you don't need to?

what debt?

> UPI is directly connected to your bank account.

oh, then it's a hard pass from me. i do not connect anything to my bank account and keep cards in separate banks for security.

That's because you are used to and expect card frauds. In UPI, the only way money leaves your bank is if you enter your PIN. Even standing instructions (called payment mandates) are required to notify you before they execute and you can stop/cancel it at anytime. (like Apple App Store subscriptions, but for everything!).

What happens when you buy or order something online and it doesn’t come, is broken, they won’t take it back, or a myriad of other situations? That’s fraud.

Withdrawing money from a credit card is taking on debt. Credit and debt are related concepts. Ask yourself this will you have to eventually pay interest on the borrowed money or not?

You can have other (non credit, say savings) bank accounts for security too. It's just as easy (or easier) as getting a credit card here (in India).

> Ask yourself this will you have to eventually pay interest on the borrowed money or not?

No, because after a month, there will be an automatic payment from my bank for the balance. In that time, the bank is giving me their money and they’re on the hook for any fraud.

Why is the bank doing this for you? Out of the goodness of their hearts?

> Withdrawing money from a credit card is taking on debt.

i understand where the confusion comes from. i use the term “credit card” generically for debit and credit cards. sorry for the confusion.

> what debt?

You are taking debt whenever you use credit card. If you miss/forget payment, some tech fault or sometimes just because you can be charged hefty interest or charges.

You can keep a separate account for your daily transactions.

sorry for the confusion. i use the term “credit card” generically for debit and credit cards.

most people i know have debit cards.

Not sure it qualifies as debt. It's just an agreement with your bank to give them that money in a few weeks / days. And if you commit to spending some small amount per year with your card (usually something like $1500), the bank will offer you some nice perks on their products that you don't get by using other payment methods. If you use something like UPI and you are making some kind of deal with your bank, you are basically losing money.

Credit card annual interest rates can be as high as (or even higher than) 50%. This is not trivial, it can (and does) ruin lives. It is a type of debt (though conditional).

I don't know about other areas, but in the West the overlap between credit card users and people who can get a decent loan at a <10% interest rate is very high. Which is why for most credit card users, credit is a no go if they are not paying it back quickly. UPI counterpart's use case is to send a bit of money to your friend when you share a meal etc.

You have to remember to pay back your credit card debt before the clock runs out. Once you make a UPI payment the transaction ends there (because the money is debited from your bank account and you are not taking on a conditional loan). You don't have to remember to pay the UPI company anything after the fact. I hope this explains how UPI is different from credit cards.

> You have to remember to pay back your credit card debt before the clock runs out

In my experience paying with credit is a fire and forget action, since the money is debited automatically at the end of the month, with no interest. The UX is great, since it only takes a card swipe [as long as I have the funds to pay it back and I'm within my credit limit].

In an scenario where you are not debited right away, I agree completely. But I would only expect that to happen by accident or if the user lacks the financial literacy to understand there are better ways to buy whatever they want. I may be missing some financial corner cases.

I don’t remember when was the last time I’ve paid my credit card, I’ve set it on auto pay. Plus I accumulate enough points at the end of the year for one way trip to India.

> UPI is directly connected to your bank account. It does not go through VISA, Mastercard or whatever.

This is technically incorrect. UPI is connected to NPCI, which runs the platform and charges the participating banks for this service. Same for RuPay cards by NPCI.

The NPCI is nothing like VISA or Mastercard. And you are right pointing this out is only a technicality.

I’ve used credit card for more than 10 years and I’ve never paid any interest in those 10 years. If you pay your bill in full every month then there’s no interest charged.

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