Perils of UPI

Last week, I met my cousin and her family who were visiting from US. Their visit to India was after gap of more than 3 years due to COVID-19. Needless to say biggest change they had seen in India was with regards to how Indians were paying for things. They were shocked when small shopkeeper asked them to pay via Phone Pay or Google Pay instead of giving cash! 

UPI has been game changer for Indian payment industry. In December 2022, UPI processed more than 7 billion transactions. In 2022 calendar year, UPI processed more than 75 billion transactions worth ₹125.94 trillion ($1.5 trillion). In world of startups, due to volumes and customer base UPI could be in Hectocon (valued at $100 billion) club.

UPI does offer amazing use cases which are ground breaking and very innovative. Having used UPI for various use cases in last year or so, I have realised there are 2 drawbacks that are slowly emerging… 

• When I go for a walk I don’t carry wallet or cash with me but my phone is with me. As a result, if I like something inevitably I end up buying it (much to annoyance of my wife!). UPI has resulted in more spending for sure. Due to rising cost and tight budgets customers in UK are switching back to cash rather than digital payments. Hopefully Indian banks would start to include available balance data in text messages sent after UPI transactions (similar to card transactions).

• When I was growing up, going to grocery shopping with parents was favourite chore. That was cash dominated era. We used to have competition to calculate bills / cash details. If things costed ₹16.75, mom / dad used to hand over ₹20 and get remaining cash back. Then to encourage maths and calculation practice, me or my brother used to have assignment of validating shopkeeper has done calculations correctly and handed appropriate change. This was similar case for everybody from my generation. This helped develop strong mathematical skills. With UPI payments, this calculation part is no longer there. I worry for Mathematics skill development. 

Hopefully Indian would find creative ways to address both these concerns and help UPI reach new heights! 

PS – the complaints about not getting ₹1 chocolate in cash era when there was no change is little lame. Now you no longer get those small chocolate. With money saved you can actually buy and eat chocolate you like rather than whatever shopkeeper used to handover…