UPI: How the 'Panga' lost track in ending the monopoly of global giants

Experts say UPI may not have favoured foreign players, but some believe it has not protected the Indian ecosystem it was supposed to

When Nandan Nilekani, the architect of India’s unique identity programme, put together a ragtag team of developers to work on the future of digital payments in the country, the codename given to one of the key projects was ‘Panga Project’. Panga, which roughly translates to ‘taking on’ in Hindi, was an apt name since the unofficial goal of the programme was to beat global giants such as MasterCard and Visa and break their monopoly in payments.

What Nilekani’s team built, laid the foundation for the Unified Payments Interface (UPI), a platform that is now used by millions of Indians to send and receive money between each other. However, recent events have made people question if the UPI has actually delivered on its promise of busting monopolies, or has simply aided in the building of new ones.

Vijay Shekhar Sharma, the founder of India’s largest digital payments company Paytm, in a series of Tweets and interviews last week voiced his angst with the way WhatsApp, an instant messaging app owned by Facebook, had implemented digital payments through UPI. Sharma alleged that WhatsApp was able to “arm twist” the National Payments Corporation of India (NPCI), the body which runs the UPI, to receive favourable treatment.

“It is not at all about being protectionist. Everyone should be allowed to play the field. But no one should arm twist and tweak rules to suit their designs. I have always maintained that WhatsApp is a major security risk to India. But just like any other player, they are and should be allowed to operate in the country. However, they need to follow the rules,” Sharma told Business Standard in a recent interview.  

It’s not just Sharma alone, there are murmurs in the industry that the initial thought that UPI would act as a strong weapon to counter the control of digital payments by foreign entities may have lost track.

“The comments made by Vijay Shekhar Sharma have some merit. The intention of the government in launching BHIM (a UPI app built by NPCI) was to develop indigenous solution and for indigenous companies to have mastery over the payments landscape,” says AP Hota, former CEO & MD of the NPCI. “Unfortunately RBI developed cold feet on this citing reasons that NPCI (the clearing house) should stay away from solutions that interface with customers directly. Such a purist approach to regulation helped Google and WhatsApp to fill the gap,” added Hota who himself worked with RBI before taking up the helm at NPCI.

A member of iSPIRT, who spoke off-record, recalled a meeting between head honchos of the organisation and Vijay Shekhar Sharma in early 2016 to try and get him to support UPI. In the course of the meeting, Sharma was briefed that the open payment architecture would probably hurt Paytm, the largest digital payment startup, the most since it would negate the need for people to load money into digital wallets.

Sharma, being an eternal optimist, the person said, challenged that view, saying that UPI would help Paytm since it would make it easier for people to load money into their digital wallets. With him on their side, iSPIRT and NPCI launched the UPI platform in April and after several delays the first apps built on the platform began hitting the Google Play Store by August that year. A little over a year and a half later, Google launched its own payment app for India, Tez, built on the UPI platform.

Hota adds that NPCI should be allowed to exert control over the digital payment ecosystem in India rather than just act as a developer of infrastructure in order for Indian companies to command the market. He isn’t alone in believing that Indian firms should receive preferential treatment over their foreign counterparts who have the financial muscle to deploy massive amounts of money to skew the market in their favour and end local competition.

Emails sent to the RBI and Nandan Nilekani seeking their comments for this story did not elicit any response, and neither did phone calls to members of iSPIRT, the grouping that’s largely behind the development of “India Stack” of which UPI is a part, for an official response.

Lalitesh Katragadda, a key volunteer/developer of the “India Stack” and a recently appointed committee member to the Ministry of Electronics and Information Technology (MeitY) paints a different picture as to why UPI was built as a replacement for MasterCard and Visa. “It became apparent that the VISA and MasterCard charges were too expensive for the common man and they were not designed for the one rupee, three rupee and five rupee kinds of transactions.” 

The idea behind building UPI had less to do with Indian versus foreign and more to do with building a solution for the country to transform itself into a cashless society, Katragadda added. 

However, he agrees with Hota that India should ring-fence its economy, if not just its digital economy, from the onslaught of foreign companies. It’s not that MNCs or foreign investors should be kept out of the country, but he says that bulk of the money they deploy goes into subsidies and discounts rather than actual innovation.

The fact of the matter is that all the large digital payment companies, like all large Internet companies in India, are either multinationals or are local firms that have accepted huge investments from foreign entities. While Sharma’s anger can be seen as coming from one of the biggest proponents of local innovation in India right now, others see it as a largely Chinese firm’s attempt to cry foul and deter the entry of a deep pocketed and innovative rival from the US.

“I don’t think UPI has favoured any MNC. What has happened is that the Government of India has yet to make laws to protect our own companies. UPI is just an example and it is one of the first cases where we’re seeing that unless we ring-fence our economy, MNCs or international investors who have far more money to market their products, will run away with the market - and India will bleed hundreds of billions of dollars of revenue every year which could otherwise be used to fuel India's socioeconomic needs," adds Katragadda.