top of page

By:

Correspondent

23 August 2024 at 9:59:04 pm

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain...

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain free irrespective of the amount, while merchant payments up to Rs. 2,000 remain free. Small merchants receiving up to Rs. 1 lakh a month through UPI QR codes will also continue to enjoy zero MDR. The government says roughly 96 percent of merchant transactions will remain unaffected. So, technically, the customer is exempt. MDR is not a tax collected by the government or NPCI. It is a charge within the payments ecosystem, to be shared among banks, payment-service providers and UPI application providers. But that does not make the economics irrelevant to customers. A merchant who previously accepted a large UPI payment at no direct payment cost will now have to absorb a fee. The government has advised banks to ensure that merchants do not pass the MDR on to customers. The economic reality is less tidy. Businesses ultimately recover costs through their overall pricing. Whether the new charge appears as a visible surcharge, a change in discounts or simply becomes part of the cost of doing business will depend on the merchant and the market. That is why the real beneficiaries of the new framework are not necessarily the customers alone. Payment companies, banks and other participants in the UPI ecosystem acquire a new revenue stream from transactions that were previously free. Paytm, for instance, has said the new MDR will generate additional revenue from merchant transactions that earlier carried no such charge. The money is therefore being redistributed within the payments ecosystem. Small businesses are deliberately insulated, an important distinction in an economy where street vendors and neighbourhood shops have adopted QR payments because they are cheap and frictionless. There is also a larger question. UPI became ubiquitous partly because its basic proposition was brutally simple: instant payments without a visible charge. Introducing MDR for a slice of transactions changes that economic model. The government’s argument is that UPI needs a sustainable financial architecture as its scale grows. But sustainability should not be confused with costlessness. Someone has to finance the infrastructure, security and technology behind a system processing billions of transactions. For now, the customer remains protected. The real test will be whether merchants absorb the cost without quietly transferring it through prices and whether the revenue flowing to banks and fintech companies translates into a stronger, more resilient UPI ecosystem rather than simply a new source of income for its intermediaries.

Bad Roads, Ugly Politics

Suyash Padate
Nov 1, 2024
2 min read

The pathetic state of roads in Mumbai city as well as its suburbs has made daily commute a dangerous affair. The residents are miffed with the BMC over its lackadaisical attitude. Mumbaikars tweet photos, post videos to grab attention, but everything is in vain. Who cares for the common people. Backbreaking journeys have become part and parcel of life. Political leaders are busy mud-slinging.


This year the monsoon took a break after almost four and half months. During this time some of the roads virtually became non commutable. It may be recalled that the Chief Minister Eknath Shinde first announced to make Mumbai roads pothole free.


Its almost two years now the BMC has concretised only 9 percent of roads it planned to concretise. This decision was taken when it came to light that due to the properties of bitumen in asphalt roads, potholes are a regular occurrence due to contact with water during monsoons.


Hence, to solve the problem of potholes, the corporation has adopted a policy of cement concreting of 6-meter-wide roads in phases. The decision was taken but the dilly-dallying affair made things more difficult.


Mumbai’s traffic does put a lot of strain on roads which is not the case in the other developed countries. Second most important aspect is concretisation of roads is done partly and in phases.


The worst problem which is faced is repeated digging for cables and drainage, which weakens the roads. Above all corruption in BMC makes matters worse as a result everything comes to grinding halt.


According to experts, repairing potholes is a reaction with symptomatic treatment. By and large we are dispensing superficial treatment without addressing the root cause. The long-term solution will be to have roads with no potholes but what we need is the means and technology to achieve this. But for this political will is necessary which we lack on every step.


Mumbaikar’s are convience that corruption in the municipal corporation is the main reason. Contractors have had a monopoly over the last 20 years and this is the reason why reputed companies never come ahead for these projects.


As a result, in the name of attendance and repair, the BMC does shoddy work. Crores are spent but the end result is nothing. The BMC is not paying attention to the crust. If the crust is weak, potholes will see an increase. Without any thought or technical know-how, potholes are filled with cold mix.


This is the reason why the city and suburbs continue to have craters on the roads.


Craters, a serious threat to the safety and security of people. Mumbaikars fade up from their repeated visits to orthopedic surgeons.


They are in a mood to teach a proper lesson to those who were at the helm of the affairs.

Comments

bottom of page