100% agree. As of now, while there is some pricing (MDR of 1.1% on txns over 2k), pricing on certain categories, the only people making money from this is NPCI, through subscription fees etc that banks pay to use the payment rails (eg UPI) developed by them. In fact, they reported profit of 1134 Cr in FY24! Compare that to the UPI Apps who are making losses in the 100s of Crs!
Banks are also making money, no? No matter which UPI app rules, banks get to keep the deposits. Money never leaves. They earn higher float income on that higher deposit base.
1. Do you think raising the cap on B2B payments would attract more players to focus just on B2B? Or is the real hurdle less about limits and more about B2B being seen as "unsexy"?
2. What’s your take on having a Pix-like MDR for B2B payments? Do you think it would work?
3. Does Credit on UPI also have transaction limit?
1. I think even if we raise the cap for B2B payments, the experience for UPI is still mobile first. Right now, the way UPI works is that it can only happen through mobile apps (the NPCI CL is embedded in the app for PIN encryption and sharing, and the device binding step authorizes only a specific device to make payments). Unless we can move to some passkey sort of method that allows private key sharing between devices, or we're able to do UPI payments on the desktop web this will be challenging)
2. MDR would need to come in at some point. Even if its a minimal 0.10 - 0.15%, it should be enough to atleast pay for itself
3. Credit on UPI has the same limits as regular UPI transactions. 1 Lac for regular txns, and 5L for specific categories
Nope, that is still mobile first. The delegated payments feature just allows "add on VPAs." Think of it like add on cards to a main credit card, which allows other people to use that limit.
Sure, but at the very least, it should enable finance teams in companies to make payments independently while still debiting from a centralized account.
For example, when you purchase something on Amazon from your laptop, you enter your UPI ID on laptop and get a push notification on your mobile phone to approve the payment.
A similar setup could be applied to B2B transactions. Finance teams could use “add-on VPAs” for employees handling payments. When these employees initiate payments from their desktops, they could receive push notifications on their phones to approve the expense, helping companies make smoother B2B payments than NEFT etc, fixes the payment approval problem and do some extent the device issue? Or doesn’t it?
Possible, but yet to see this scale. Two issues still remain in my opinion:
1. Behavioural: Yet to see finance teams authorize employees to use their mobiles to give authorization for large ticket transactions. Even though this exists now, IMPS & RTGS is still seen as more secure, and if you start authorizing individual employees and devices to make payments, it could open up a pandora's box for way more frauds. Right now, the reason why only very few employees can authorize these transactions, is not because of a capability issue of existing payment methods & UPI, its more from a fraud perspective. In fact, what I've seen is, the additional checks and balances in the process are preferred because it adds more guardrails.
NBBL - Netbanking that NPCI is trying to pilot is a UPI like rail, but for netbanking, which is what it is banking on to drive the B2B transactions. You can check out the article below:
2. Transaction limit: Even a limit of 5L is still fairly low when it comes to B2B transactions.
Could work for petty cash type of transactions, but existing methods such as corp cards / employee wallets already exist for this. The primary use case that delegate payments was launched for, was to give financial access to families of the UPI account holder: ex parents, children, spouse etc.
I meant additional add on VPA’s only for finance teams members who are authorized to make payments and ofc with proper approval workflows. Opening it up to all employees is a slippery slope.
And yes, ₹5 lakh is extremely low for B2B transactions. Unless the transaction limit is not significantly increased—UPI won’t work for B2B use cases. However, I believe this will likely change in the future.
who is making money on all of this UPI usage?
It has turned into an expensive customer acquisition strategy than a solid business model. wdyt?
100% agree. As of now, while there is some pricing (MDR of 1.1% on txns over 2k), pricing on certain categories, the only people making money from this is NPCI, through subscription fees etc that banks pay to use the payment rails (eg UPI) developed by them. In fact, they reported profit of 1134 Cr in FY24! Compare that to the UPI Apps who are making losses in the 100s of Crs!
Banks are also making money, no? No matter which UPI app rules, banks get to keep the deposits. Money never leaves. They earn higher float income on that higher deposit base.
1. Do you think raising the cap on B2B payments would attract more players to focus just on B2B? Or is the real hurdle less about limits and more about B2B being seen as "unsexy"?
2. What’s your take on having a Pix-like MDR for B2B payments? Do you think it would work?
3. Does Credit on UPI also have transaction limit?
1. I think even if we raise the cap for B2B payments, the experience for UPI is still mobile first. Right now, the way UPI works is that it can only happen through mobile apps (the NPCI CL is embedded in the app for PIN encryption and sharing, and the device binding step authorizes only a specific device to make payments). Unless we can move to some passkey sort of method that allows private key sharing between devices, or we're able to do UPI payments on the desktop web this will be challenging)
2. MDR would need to come in at some point. Even if its a minimal 0.10 - 0.15%, it should be enough to atleast pay for itself
3. Credit on UPI has the same limits as regular UPI transactions. 1 Lac for regular txns, and 5L for specific categories
1. Can the device problem be solved with the new delgated payments feature introduced by the RBI?
Nope, that is still mobile first. The delegated payments feature just allows "add on VPAs." Think of it like add on cards to a main credit card, which allows other people to use that limit.
Sure, but at the very least, it should enable finance teams in companies to make payments independently while still debiting from a centralized account.
For example, when you purchase something on Amazon from your laptop, you enter your UPI ID on laptop and get a push notification on your mobile phone to approve the payment.
A similar setup could be applied to B2B transactions. Finance teams could use “add-on VPAs” for employees handling payments. When these employees initiate payments from their desktops, they could receive push notifications on their phones to approve the expense, helping companies make smoother B2B payments than NEFT etc, fixes the payment approval problem and do some extent the device issue? Or doesn’t it?
Possible, but yet to see this scale. Two issues still remain in my opinion:
1. Behavioural: Yet to see finance teams authorize employees to use their mobiles to give authorization for large ticket transactions. Even though this exists now, IMPS & RTGS is still seen as more secure, and if you start authorizing individual employees and devices to make payments, it could open up a pandora's box for way more frauds. Right now, the reason why only very few employees can authorize these transactions, is not because of a capability issue of existing payment methods & UPI, its more from a fraud perspective. In fact, what I've seen is, the additional checks and balances in the process are preferred because it adds more guardrails.
NBBL - Netbanking that NPCI is trying to pilot is a UPI like rail, but for netbanking, which is what it is banking on to drive the B2B transactions. You can check out the article below:
https://www.business-standard.com/finance/news/nbbl-to-begin-work-on-net-banking-interoperability-from-april-report-124032700240_1.html
2. Transaction limit: Even a limit of 5L is still fairly low when it comes to B2B transactions.
Could work for petty cash type of transactions, but existing methods such as corp cards / employee wallets already exist for this. The primary use case that delegate payments was launched for, was to give financial access to families of the UPI account holder: ex parents, children, spouse etc.
Agree.
I meant additional add on VPA’s only for finance teams members who are authorized to make payments and ofc with proper approval workflows. Opening it up to all employees is a slippery slope.
And yes, ₹5 lakh is extremely low for B2B transactions. Unless the transaction limit is not significantly increased—UPI won’t work for B2B use cases. However, I believe this will likely change in the future.
Thanks for sharing the article.