It Pe/Pays To No More Delay Intervention | Letter to Editor

From: Ketharaman Swaminathan [s.ketharaman@gtm360.com]
Sent: Tuesday, 12 July 2022 5:02 PM
To: ‘editet@timesgroup.com’
Subject: It Pe/Pays To No More Delay Intervention | Letter to Editor

Dear Editor of Economic Times:

This has reference to the editorial entitled “It Pe/Pays To No More Delay Intervention” in today’s Economic Times.

By abolishing MDR for UPI payments, the regulator stripped the revenue model of UPI apps and thereby drove banks and other traditional companies away from this business since they are driven by revenues and profits. In the process, it also made UPI apps attractive only to new-age businesses that are driven by user count and valuation metrics.

What we are seeing today is the classical outcome of networks effect, which progressively drives more – not less – market share around the remaining players. This is a well-known behavior in the payments business and would have happened even without the Covid boost to UPI volumes.

Now to put a cap on the market share of the remaining players is like trying to bolt the barn door after the horse has bolted. Not surprisingly, efforts to do so are not bearing fruit and the regulation is getting postponed indefinitely.

Abolishing ZeroMDR regulation will provide enough incentive in itself for more companies to re-enter the UPI apps business, and obviate the need for regulatory intervention to reduce market share of the two leading UPI apps. Hopefully some of those additional players will be Indian companies, which will further the cause of Atmanirbhar Bharat as well.

While on the subject, I can’t help wondering what happened to RBI’s NUE (New Umbrella Entities) initiative to provide competition to UPI / NPCI itself.

Thanks and Regards.

 

KETHARAMAN SWAMINATHAN
Pune, INDIA