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Govt plans to make UPI QR codes mandatory for shops: Virtual monopoly for NPCI?

The government of India is looking into making it mandatory for all shops “above a certain threshold” to offer Unified Payments Interface (UPI) payments through QR codes, and give customers and shopkeepers GST benefits for using UPI, the Economic Times reports. The GST Council had given the proposal a go-ahead just before the elections and National Payments Corporation of India (NPCI), bank-owned private organisation which runs UPI, is now working to implement it once the elections after over, the report said. The plan seeks to bring about behavioural change by introducing the UPI payments for B2C transactions, a source told the newspaper, and that QR codes may also be introduced on invoices in the medium-to-long-term.

‘Virtual monopoly’ for NPCI?

While the move could indeed increase the adoption of digital payments, it would also give NPCI a monopoly as it owns India’s only two inter-operable QR code systems – one that is solely for UPI transactions and the other, BharatQR, for payments through cards as well as UPI. “This would amount to a virtual monopoly for NPCI as companies such as Paytm with their own closed QR code systems would be locked out,” payments expert Shashidhar KJ told MediaNama.

In addition, as Twitter user Srikanth Lakshmanan pointed out, the GST benefits for businesses and consumers would be restricted to those using the NPCI’s BHIM app for UPI payments or its RuPay card. He also criticised the centralisation of user data for private profit (NPCI is a private firm) and said the exercise amounted to “state-approved private surveillance” as people’s granular financial data would be stored with personally identifiable information (NPCI).

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NPCI had launched BharatQR, an inter-operable QR code network for payments, built by card networks, in February 2017. It initially included Visa, MasterCard and the NPCI’s RuPay, and later American Express as well. In August that year, NPCI said that QR codes generated by UPI would be merged with the those generated by BharatQR and told the banks to ensure that their applications were equipped to read both types of codes. And in March 2018 NPCI mandated that every UPI application should be able to scan BharatQR codes and respond to merchant payment requests.

Pilot project to promote digital payments through cashbacks

The central government and various state governments have for months been discussing ways to promote digital payments as a way to crack down on GST evasion. Last August the GST Council approved a pilot project to offer incentives for digital payments in the form of cashbacks. Under it, customers who made payments using Rupay cards and BHIM UPI applications would get a cashback of 20% of GST, subject to a cap of Rs 100 per transaction. Uttar Pradesh, Bihar, Maharashtra, Gujarat, Tamil Nadu and Assam chose to participate in the pilot. A group of ministers under Bihar deputy chief minister Sushil Modi had estimated the revenue impact of the cashback scheme would be around Rs 980 crore a year when it was rolled out nationally.

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