[nish1500]

When you pay a merchant $100 with your card they get about $97. When this $100 has exchanged hands 50 times only $15 remains. The bank owns the other $85.

Cash is a hassle but it cuts out the middlemen. We need a unified payment system in western countries, but it's almost impossible given how much of a chokehold big banks have over our economy.

Capitalism at its finest.

[signal11]

UPI has no dispute resolution (as of now). So if you pay with UPI to someone and have a dispute, good luck. You have to approach the Indian courts to get your money back, which, given the Indian justice system, is… difficult.

By contrast, dispute resolution with cards is much easier. Also, I don’t recognise this 3% figure — not in all geographies.

Eg Europe under PSD2 has 0.3% for credit cards, and 0.2% for debit cards. In Canada, Visa and MC recently agreed to a 1% cap.

That said, I’d be very interested in seeing where the conversations around dispute resolution in UPI leads. Context: Indian banks have already begun to complain about UPI being free, and the Indian authorities had to quickly walk back a consultation around potential merchant-side charges to UPI.

I guess this tension between business, customers, and digital intermediaries is what makes payments an interesting space.

[hocuspocus]

The EEA cap on fees only applies to interchange in 4-party schemes, i.e. the part that goes back to the issuing bank. PSPs typically charge between 0.7 and 1.5%. But yes, it's possible to do much better than countries like the US. For starters because card-present fraud is virtually nonexistent, and online fraud is drastically lower thanks to SCA.

That said, you're right, there's a fundamental difference between moving funds in an immutable way (whose marginal price tends to zero) and a payment system.

[toomuchtodo]

Which means bifurcation will occur. Payments where you have high trust and confidence you won’t need a dispute will use UPI or similar instant payment rails. Transactions where you are not confident or are concerned a dispute is going to be required, you’ll pay the transaction fee to use CC rails. Credit cards will become “insured payment” rails for lower trust transactions.

I’d never dispute a payment to my mortgage servicer or electrical utility, but I absolutely might for a rando Facebook ad sale.

[signal11]

> I’d never dispute a payment to my mortgage servicer or electrical utility,

Er. “Never” is a strong word and it depends on scope. There have been numerous cases of overcharging. Sure, I might not dispute the payment itself, but the amount? Frequency? These get disputed all the time.

Many jurisdictions have good consumer protections for this, though, so overcharging will cause penalties— that does provide incentives for companies to do the right thing.

[1024core]

> UPI has no dispute resolution (as of now).

And cash does??

[signal11]

If UPI competed with cash, that’d be sort of fine.

The problem is that UPI enthusiasts think it’s a perfect replacement for cards. It’s not.

Even with cash, because you need physical presence, you can inspect the goods. Under many UPI scenarios, that doesn’t happen.

So a “and cash does?” comment sounds like a clever zinger, but in reality cash and UPI have different threat models.

Equally, UPI is a useful alternative to cash and cards. The real world isn’t black and white. It’s not like UPI has zero value. But it’s not like cash and cards has zero value either.

Finally, one scenario where cash > UPI is: anytime there’s an internet shutdown. Of which India has an insane number.

[colesantiago]

You can use UPI offline:

https://www.gadgetsnow.com/how-to/how-to-pay-online-using-up...

This is what I mean with so many misconceptions, falsehoods and just outright conspiracy theories, from people who have probably never used UPI.

[signal11]

> you can use UPI offline

Yes, UPI Lite (local offline wallet) has a transaction limit of INR 200. Yes, 200. With a limit of 4000 per day and the Lite wallet can hold 2000 at any one time.

Good luck doing anything serious with that. Also, good luck reloading the wallet when the internet is blocked.

Note: the context of this thread was a UPI vs Cash comparison. Cash is king when the internet isn’t available. UPI Lite notwithstanding.

And for those unfamiliar with Indian context: internet shutdowns happen at the drop of an hat, at a city or sometimes state/part of a state level. For days or longer. In one notorious instance, for multiple months. There’s little oversight, any local authority can make it happen, with little recourse by the public.

They are a massive failure of local governance in India. And getting defensive about it won’t help you in the long run, if you live in India. Sooner or later, you’ll be affected too.

[alephnerd]

> They are a massive failure of local governance in India. And getting defensive about it won’t help you in the long run, if you live in India. Sooner or later, you’ll be affected too.

Yep. Welfare Schemes are distributed via UPI, and internet shutdowns often affect regions where there are a number of residents who are eligible for welfare schemes like MGNREGA, PMSBY, etc.

Look at Manipur for example or portions of UP during law and order flairups.

That said, in my ancestral village it is being used as a cash alternative. Almost no one there is eligible for a credit card, and "payment disputes" are resolved with lathis or bandhs.

[vivegi]

> UPI has no dispute resolution (as of now)

Not true. [1]

[1]: https://www.npci.org.in/what-we-do/upi/dispute-redressal-mec...

[signal11]

The process you link to is Indian bureaucracy at its finest. It also focuses on disputes surrounding UPI payments, ie “I paid via UPI and the money didn’t arrive”. Look at the categories of disputes on that page. The “fraudulent transaction” is extremely narrowly scoped to fraudulent use of your UPI account.

But by “dispute resolution”, most people in payments mean commercial disputes — “I paid for a chicken, you sent me an egg” type disputes. Or didn’t send anything at all.

That’s hard to deal with in UPI, last I checked. But I could be wrong! But then — why do all these UPI disputes and scams keep cropping up in newspapers and social media?

Another scenario is dealing with a fraudulent withdrawal (no matter how it happens) by getting a refund with one phone call. The driver for this is that under most consumer-friendly legal systems, the customer gets a near-immediate refund for any unauthorised withdrawal. UPI => no. It’s damned difficult.

To be clear, this isn’t a problem with UPI as a piece of code, UPI moves money from A to B cheaply and quickly. Great. But the governance that is wrapped around it has serious consumer protection problems.

The problems (eg dispute resolution) will be an interesting one to resolve. Despite the bold “not true <link>” parent comment, disputes in UPI are currently a headache. And part of the reason is the narrow scope NPCI can act in.

[vivegi]

I use UPI daily.

1. In scenarios where UPI is replacing a cash transaction e.g., purchasing fruits from a fruit vendor on the street (just did it a few hours ago), the transaction is immediate. Disputes are settled exactly as how it would be done with a cash transaction i.e., discuss and settle with the vendor in situ.

India had a separate settlement mechanism called Cash-On-Delivery that was needed for companies like Amazon/FlipKart etc., to penetrate the ecommerce space before UPI came into being. Even Amazon does returns and refunds through their online/app-based customer service process.

2. In scenarios where UPI is replacing a credit card e.g., I order food through a food delivery app and an item is missing. The food delivery app provides a customer service option where they are able to resolve the issue (they could a. deliver the missing item at no charge, b. give me a cash coupon for the inconvenience that I can use on their app, c. refuse to resolve the issue). I haven't had a scenario where the service provider has refused to resolve the issue.

3. As far as fraud is concerned, a couple of months ago the local police visited our apartment complex for a brief meeting to educate people on frauds and safety. They focused on digital crimes and told us about the national helpline for cybercrime. [1] Residents can dial 1930 to reach the national cybercrime helpline to report crimes, including online frauds -- this also includes the QR code scams that you hear about in the media. They register the complaint and guide you with the process for recovering lost funds. I haven't done this myself, but what the officer explained is that based on the transaction details, the national cybercrime control center coordinates with the participating banks on both sides of the transaction to immediately freeze funds. You can also take the complaint number to the nearest police station and get an FIR (First Information Report) filed to get the fraudsters criminally prosecuted.

4. In scenarios involving a buyer-seller dispute, there is the consumer protection laws where the consumer can directly file suit against the provider in a consumer court. These are special courts (separate from the civil and criminal courts) and are very effective in protecting consumer rights. This works for all types of consumer disputes about service/product issues.

This would be the last resort for protecting consumer rights even in cases where a credit card company declines to handle a consumer's complaint on technicalities and is not just for UPI. These courts are at the district level in all states. [2]

People in the west and other developed countries have a lot more of their digital transactions occuring on credit/debit cards and are comparing that with UPI. While what UPI is doing overlaps with a lot of that, it also is more than that in enabling micropayments and p2p payments. So, that is of value for the average Indian resident.

[1]: https://cybercrime.gov.in/Webform/Helpline.aspx

[2]: http://ncdrc.nic.in/districtlist.html

[signal11]

I don’t dispute most of what you say. I’ll only say that you’re a little optimistic re (3) and (4).

Speak to regular (not well connected) people who’ve been through the justice system. It’s not pretty.

But then maybe you’re lucky enough to live in a state with super responsive police and courts. After all, a lot of this stuff is a state subject and can vary by state.

But the stories of hellish experiences seem to come from all around the country.

[vivegi]

I agree with your statement above. UPI is looking at also getting credit card accounts linked to the NPCI/UPI network in the future. NPCI itself is trying to push RuPay as an alternative to Visa/Mastercard for domestic card payments.

So, a subtle difference from a payment stack perspective is that the consumer protection offered by credit cards is not necessarily a payment stack functionality but a feature of the credit card (just as credit and loyalty points etc., are a function of the credit card).

It is just a slighly different design goal and honestly most users of UPI are okay with it because they favor the cash-replacement offered by UPI.

I will say this though -- the ease of use in UPI is so smooth that if users fail to double check the QR code they have scanned (actually the UPI virtual address) with the vendor and confirm that it is indeed their account (I do it every time), there is a possibility of hackers diverting the funds at the point-of-sale through the use of fake QR codes. This risk is similar to skimming devices installed on PoS machines/ATM machines to steal credit card data.

[colesantiago]

Glad to see it.

It makes me sad that there are so many misconceptions about UPI that people are willing to resort to falsehoods (such as CBDCs and privacy) and it shows that most criticisms are from people that haven't used it in the real world.

[signal11]

There are misconceptions about UPI all right, but a lot of it is from UPI proponents who have no idea what dispute resolution means.

Order a bed and pay via UPI, say. Get a chair instead. These type of commercial disputes are difficult for a payments service to adjudicate.

When you use the term “falsehoods”, keep in mind that a lot of these criticisms come from people who’ve worked in payments for decades, and know a fair bit about customer protection.

If we’re going to talk about falsehoods, we should also talk about the falsehoods UPI proponents share about card payments.

And to be clear, my focus is customer protection. I don’t give a flying fish about the mechanism.

[cubefox]

> We need a unified payment system in western countries, but it's almost impossible given how much of a chokehold big banks have over our economy.

Credit card companies charge even more than banks.

[umeshunni]

Most of the interchange goes to banks.

[1024core]

> When this $100 has exchanged hands 50 times only $15 remains.

Just to nitpick: 0.97^50 is 0.21806. So only $21.81 would remain and the banks would have $78.19

[nish1500]

I used 2.9% + 30cent for each transaction

[thatfrenchguy]

Only in America are fees that high :)

[somerandomqaguy]

Plusses and minuses to each system. You don't need to pay the cost of transporting the cash to and from a bank (worst case is armored car transport), and electronic transfers have lower accounting overheads (no need to manually count). And modern credit cards have pretty sophisticated fraud/card theft detection nowadays.

[louwrentius]

I agree. From what I understood, the Dutch iDeal system (which I love) might become a European standard. It doesn’t cover large parts of the world but I think the fees are not as “insane” as PayPal or systems like this.

[aleph_minus_one]

> From what I understood, the Dutch iDeal system (which I love) might become a European standard.

What can you tell me about iDeal's privacy aspects? Does it allow anonymous transactions (here it mght make sense to distinguish between

- non-anonymous entity sends money to anonymous entity

- anonymous entity sends money to non-anonymous entity

- anonymous entity sends money to anonymous entity;

"anonymous" is here to be understood as "anonymous to iDeal", i.e. iDeal has no practical chance of de-anonymizing this identity)?

[louwrentius]

As far as I know only the Merchant and your account is known to iDeal, not what you buy.

[sunshinerag]

wow Capitalism? Where?

[solatic]

You make it sound like the other $85 that the bank got sits in a vault somewhere, extracted from the economy and hoarded in a stockpile. Actually the banks have their own costs (e.g. salaries) and much of the money is further invested. In fact, the natural state is to keep so little cash on hand that Dodd-Frank forced the banks to hoard more than they otherwise were inclined to.

Yes I've oversimplifying a lot of differences (payments infrastructure vs. investment banking, for one) but the point remains. I do think that day-to-day realtime debit-style payments should be a publicly-operated, minimal-or-zero-fee commodity rather than a massive source of rent, but having access to electronic payments for consumer retail is literally responsible for trillions of dollars more economic activity than you would see if we went back to cash-only.

[nish1500]

Salaries for what? Marketing? Obscene bonuses? Downtown office buildings? It is a manufactured need.

I am simplifying things but if we had a public owned payments system that wasn't a profit centre the costs would be far less.

Even within the developed world the costs are very different between Europe and the US. Your fees are paying for someone's hefty bonus and lobbying expenses.

Again, it has been proven. UPI works.

[wildrhythms]

Why do you believe the investments made by the middlemen processors and banks are more worthy than the investments made by businesses who the consumer is directly patronizing?