Top episode. So many of my very educated friends don't realize how much better we could have had it had we not blocked global (and Indian potentially) payment players from coming in. Govt backed UPI could have come up in parallel and competed for wallet share. It may have even done better than the private players in some segments for some kinds of payments. Also, contactless cards, now well integrated globally with smart phones and many wallets, could have worked so well for so many applications (including ticketing as in London). The opportunity loss of UPI has potentially been huge. But we will never know.
It felt to me that the yardsticks of Public Goods applied by Ajay on DPI are different from the ones applied on things like roads and vaccines. 1. Roads and Vaccines are finite too. Too many road users sometimes diminish my ability to use roads due to congestion, doesn't mean it's not a Public Good. Just because UPI network congestion leads to some failures doesn't mean it's not a Public Good. 2. If traffic congestion in a road is because of it being narrow (a design fault which can be fixed) we don't exclude that road from the ambit of PG. The same applies to UPI. You can expand the radius of its pipeline if it's relatively narrower vis a vis online payments traffic. 3. We exclude two-wheelers and trucks from expressways. We exclude some financial entities from UPI. If first one is PG then why not the second one ?
Vaccines are not a public good. Please see EiE Ep 27, th-cam.com/video/BxDn22forhE/w-d-xo.html . They are a private good with an externality. Roads are excludable and not a public good. This is why the policy problems of infrastructure are different from the main line problems of public policy. Roads are rival once they are congested (hence congestion pricing) and excludable. If a central monopoly excludes some persons (e.g. UPI excludes non-banks) for business reasons (as NPCI is controlled by banks and RBI views banks as children of a superior god) then there are no redeeming features. Payment innovation is all about getting payments out of banks into a technology industry. Do see the readings list in the show notes. A healthy competitive industry -- e.g. internet service provision -- has the resourcing, pricing models, inter-firm contracts through which the end-user gets the illusion of well functioning internet connectivity that meets the SLA. It is because UPI is designed, and it did not evolve through a process of discovery, that the minor detail of a business model was not planned out. Therefore, the persons doing various components of work within UPI are not motivated by incentives. Therefore we see failures like failed transactions, UPI fraud, etc. This is not something to accept as normal.
Respected Ajay Shah Sir, I consider you as my teacher of economics and greatly benefit from your insights. I had a small question. I am sure you have your views on this but haven't discussed them at length in the show. Do you think that digital wallets like Paytm, Amazon Pay etc. are not close substitutes to UPI? I can think of one reason why they may not be considered close substitutes- lack of interoperability across wallets. But then, there could be bridge platforms that could come up to serve this purpose. Is the UPI a monopoly in the sense that such bridge platforms are not allowed to come up?
One example of how government controls and discriminates is this: Only the RuPay credit cards are allowed to be added in the UPI framework. This has resulted in Banks offering “online” RuPay cards which are used solely for the purpose of UPI payments. If someone has a Visa or a Mastercard, then they better apply for one more RuPay card. This is simply a misuse of the governments control of the payment system.
As a venture capitalist, here is another nuance that might be missed here. DPIs take away the profit motive by diminishing the ability for any one company to earn a super normal profit in the future ( ie the market might evolve to become an oligoply or a monopoly). However this incentive ( profits in the future) is the cost of innovation in the present.
The last few episodes have been absolute masterclasses. I think that the structure of these episodes are perfect. I often find myself having questions or feeling like an aspect was left incomplete, only to have it answered in a later chapter. Highly engaging 😊
UPI has been the sole semi-success in the last few years - something that seem to be working. Many people in the comment section are feeling extreme amount of cognitive dissonance around the sole thing that seened to be working, and what it means for us as a nation. If the audience is reading this comment, then I would encourage you to be deeply unhappy with our state of affairs (even if we turn out to be the most developed nation in the world), than be complacent and happy. Dissatisfaction leads to change. Complacency leads to the morass of stagnation.
Beautiful piece, as always Ajay and Amit! The UPI may be a tactical gain for India, but it is a strategic loss by creating a platform that provides so much information to the state without my informed consent. The very concept of the state is an injury to the sovereignty of individuals. Making the Indian state, afflicted by poor accountability, so powerful seems menacing to me. Amit in the concluding part takes a digression and says that demonetization was a crime against humanity and that any economist supporting it was either a bad person or a bad economist. When demonetization happened in 2016, the whole of India became an overnight expert on the subject. I was certain that it was both a bad and malicious step, but there was a total lack of clarity. Within a week, Prabhat Patnaik wrote a piece explaining how it would fail miserably. In his view, black money was a stock problem, whereas currencies facilitated flow in the economy and were only marginally part of the stock. I continued to search for convincing philosophical answers, and then one sentence from Amartya Sen on TV settled all my doubts. He said that when a government can go back on its promise written on every currency note, it can also confiscate my property anytime in the name of the national good. After about six months, I read a piece by Jagdish Bhagwati where he supported demonetization and called it expansionary because more money would come into the system and digital payments would replace cash transactions. I lost my respect for Jagdish Bhagwati, as his argument seemed akin to suggesting that cancer was good for the economy because it benefited the pharmaceutical industry.
The amount of rich insights you provide to us with such high quality content, its amazing and that background is cherry on top. I always learn something new from these episodes thank you.
Thanks for offering another perspective to the narrative of inclusion and accessibility that has been defining the contemporary zeitgeist in our nation. From my perspective, it's the nature of everything to swing like a pendulum between two opposing forces, such as centralisation and decentralisation, liberalism and conservatism, and left and right, while spending very little time in the perfect balance that lies somewhere in between.
I agree with Ajay that there should be some revenue model around UPI. Organizations providing UPI services should be able to charge for services rendered as that will help them invest in dispute resolution and better customer services.
These men are extremely bright, honest and committed to the progress of the nation. No doubt. But here Mr. Shah has a missed the point that the govt has not ratified any monopoly positioning of the UPI or the JAM stack. This eco system came around when we were grappling with not just low quality of delivery but a terribly low penetration of any damn service by any public servants. We were in such a rotten shape, riven by corruption, societal inequity, fuedal impulses. The GOI said let's get started. Somewhere and will address even core issues one by one. They have to be more 360 degrees in their assessments before jumping to conclusions
1. "we were in such a rotten shape, riven by corruption...the GoI said, let's get started somewhere " The implicit assumption in your question is - getting started with all the great intentions and warrior like energy is enough to prevent all those malaises. Would you agree with this? 2. "Terribly low penetration of any damn service" - the implicit assumption here is - goi services in metropolitan cities or even Delhi NCR is spectacular and outside it is hell. Would you agree with this? If you answer "yes" to my understanding of your implicit assumptions - you may wish to double check these assumptions. They seem quite paradoxical to me. I am sure they will appear so to you as well.
If you're saying that UPI being a monopoly of the state is only "by chance" and only because the state machinery thought "bloody, let's get started somewhere", think again.
He gave an example of PayPal. But in US itself federal reserve felt the need to facilitate payments themselves. If competition is key then there was no need for fed to do this. Paytm tried to remain relevant in sending and receiving money. But they found out quickly that they needed to pivot to open system. He gave an another example of TCP /IP. It won the protocol was because it was seemless and open source. Govt in India came set the standard made it an open system instead of dozen closed system.
Specifically on the topic of digital payments, is it possible that the pervasive lack of public trust in non-governmental entities when it comes to handling monetary transactions (eg: banks failing, fraudulent transactions being charged on cards) would anyway necessitate a state-imposed/sanctioned system for widespread adoption?
Lot of #Frauds happening on #UPI . Inadvertently click something and its disaster all money gone in a swoosh 😢the banks say they can't do a damn to address any fraud that occured despite banks being the only players ! On 6th of july i am supposed to have clicked on some link saying ICICI imobile and money was tsken out of my account 3 rapid succession on 9th july😮😢 Any ideas how i could go about recovering it❤ How can
No one can PLAN for complexity, it is what they call BEING AGILE in developing side. System improves from feedback loops, yes there will be errors from which pain arises but as they say No pain No gain.
I am going to listen to the agriculture episode after this but wasnt the moral imperative of solving basic food needs of the population more important at the time of the green revolution? Diabetes epidemic is a better problem to have than a starvation epidemic?
UPI etc., are public goods in a sense that they are non-rival and non-exclusive if seen from the consumer pov. I agree, from the service provider point of view they are not a public good. But, in the context of someone making use of the UPI system, I would still call it a public good.
As a card carrying economist I object. We made the phrase Public Good and we defined it. You are welcome to call it a purple good or a stack good or whatever. Don't use a technical term in a wrong way.
@@ajayshah5705 Fair enough. In that case how - for instance, national security - is a public good? Not everyone can participate in it, even though everyone is being benefitted? Isn't it the benefit part that makes an entity a public good?
@@hdsih993hh May I point to Ep 25 `Understanding the state', th-cam.com/video/jIilzNHgllg/w-d-xo.html Ep 26 `When should the state act', th-cam.com/video/_CBIW4iU9Hw/w-d-xo.html . Ep 33 on public choice theory, th-cam.com/video/2za-ovGsfFM/w-d-xo.html Please read Kelkar & Shah 2022, www.mayin.org/ajayshah/books/isotr.html
Riffing off on Ajay Shah, I would say, also please verify the amount of RBI regulations that private wallet service had to comply with in terms of KYC etc. UPIs raison d'etre seems unassailable, because our payment infrastructure is kaput. Be it wallets or payment banks(a joke of the first order)
The only reason UPI developed a monopoly is because no alternatives were allowed to compete by the state. UPI might be the best, but we'll never know for sure because we never allowed anything else.
lol Even VCs in Silicon Valley pitch India-like DPI to their govt. I admire Ajay but he should stop taking delight in self-congratulatory contrarian takes.
Top episode.
So many of my very educated friends don't realize how much better we could have had it had we not blocked global (and Indian potentially) payment players from coming in.
Govt backed UPI could have come up in parallel and competed for wallet share. It may have even done better than the private players in some segments for some kinds of payments.
Also, contactless cards, now well integrated globally with smart phones and many wallets, could have worked so well for so many applications (including ticketing as in London).
The opportunity loss of UPI has potentially been huge. But we will never know.
Everything is Everything is one great example of good Public Goods🎉
and if it ever goes behind the paywall, the state should intervene by providing us 'Everything is Everything' coupons
@@waqarhussain7924 lol - coupons are the best policy for Everything on EiE ;)
It felt to me that the yardsticks of Public Goods applied by Ajay on DPI are different from the ones applied on things like roads and vaccines.
1. Roads and Vaccines are finite too. Too many road users sometimes diminish my ability to use roads due to congestion, doesn't mean it's not a Public Good. Just because UPI network congestion leads to some failures doesn't mean it's not a Public Good.
2. If traffic congestion in a road is because of it being narrow (a design fault which can be fixed) we don't exclude that road from the ambit of PG. The same applies to UPI. You can expand the radius of its pipeline if it's relatively narrower vis a vis online payments traffic.
3. We exclude two-wheelers and trucks from expressways. We exclude some financial entities from UPI. If first one is PG then why not the second one ?
Vaccines are not a public good. Please see EiE Ep 27, th-cam.com/video/BxDn22forhE/w-d-xo.html . They are a private good with an externality.
Roads are excludable and not a public good. This is why the policy problems of infrastructure are different from the main line problems of public policy. Roads are rival once they are congested (hence congestion pricing) and excludable.
If a central monopoly excludes some persons (e.g. UPI excludes non-banks) for business reasons (as NPCI is controlled by banks and RBI views banks as children of a superior god) then there are no redeeming features. Payment innovation is all about getting payments out of banks into a technology industry. Do see the readings list in the show notes.
A healthy competitive industry -- e.g. internet service provision -- has the resourcing, pricing models, inter-firm contracts through which the end-user gets the illusion of well functioning internet connectivity that meets the SLA. It is because UPI is designed, and it did not evolve through a process of discovery, that the minor detail of a business model was not planned out. Therefore, the persons doing various components of work within UPI are not motivated by incentives. Therefore we see failures like failed transactions, UPI fraud, etc. This is not something to accept as normal.
Should have done my homework before asking these questions. Thanx for the reply Ajay :)
While Amit bhai weaves his word magic, Ajay Shah leaps like some superhero of the mind.
Respected Ajay Shah Sir,
I consider you as my teacher of economics and greatly benefit from your insights. I had a small question. I am sure you have your views on this but haven't discussed them at length in the show.
Do you think that digital wallets like Paytm, Amazon Pay etc. are not close substitutes to UPI?
I can think of one reason why they may not be considered close substitutes- lack of interoperability across wallets. But then, there could be bridge platforms that could come up to serve this purpose. Is the UPI a monopoly in the sense that such bridge platforms are not allowed to come up?
I noticed Nomsita is also working on the The Longest Interview...Congrats on the new gig!
Interesting take Ajay and Amit. I was under the impression that our DPIs, especially UPI is something to be proud off and marvel about
Of course it is something to be proud of. Comparisons with tech developments in the U.S. is often inappropriate and skewed.
One example of how government controls and discriminates is this: Only the RuPay credit cards are allowed to be added in the UPI framework. This has resulted in Banks offering “online” RuPay cards which are used solely for the purpose of UPI payments. If someone has a Visa or a Mastercard, then they better apply for one more RuPay card. This is simply a misuse of the governments control of the payment system.
Favourite podcaster and favourite place :)
As a venture capitalist, here is another nuance that might be missed here.
DPIs take away the profit motive by diminishing the ability for any one company to earn a super normal profit in the future ( ie the market might evolve to become an oligoply or a monopoly).
However this incentive ( profits in the future) is the cost of innovation in the present.
The last few episodes have been absolute masterclasses. I think that the structure of these episodes are perfect. I often find myself having questions or feeling like an aspect was left incomplete, only to have it answered in a later chapter. Highly engaging 😊
Education and infrastructure were fabulous
UPI has been the sole semi-success in the last few years - something that seem to be working.
Many people in the comment section are feeling extreme amount of cognitive dissonance around the sole thing that seened to be working, and what it means for us as a nation.
If the audience is reading this comment, then I would encourage you to be deeply unhappy with our state of affairs (even if we turn out to be the most developed nation in the world), than be complacent and happy.
Dissatisfaction leads to change. Complacency leads to the morass of stagnation.
Beautiful piece, as always Ajay and Amit!
The UPI may be a tactical gain for India, but it is a strategic loss by creating a platform that provides so much information to the state without my informed consent. The very concept of the state is an injury to the sovereignty of individuals. Making the Indian state, afflicted by poor accountability, so powerful seems menacing to me.
Amit in the concluding part takes a digression and says that demonetization was a crime against humanity and that any economist supporting it was either a bad person or a bad economist. When demonetization happened in 2016, the whole of India became an overnight expert on the subject. I was certain that it was both a bad and malicious step, but there was a total lack of clarity. Within a week, Prabhat Patnaik wrote a piece explaining how it would fail miserably. In his view, black money was a stock problem, whereas currencies facilitated flow in the economy and were only marginally part of the stock.
I continued to search for convincing philosophical answers, and then one sentence from Amartya Sen on TV settled all my doubts. He said that when a government can go back on its promise written on every currency note, it can also confiscate my property anytime in the name of the national good.
After about six months, I read a piece by Jagdish Bhagwati where he supported demonetization and called it expansionary because more money would come into the system and digital payments would replace cash transactions. I lost my respect for Jagdish Bhagwati, as his argument seemed akin to suggesting that cancer was good for the economy because it benefited the pharmaceutical industry.
Please bring out a printed version of your dialogues. An excellent book it would be I assure you.
The amount of rich insights you provide to us with such high quality content, its amazing and that background is cherry on top. I always learn something new from these episodes thank you.
Very Insightful❤
Nice episode where freedom trumps everything.
I usually don’t comment- but these guys are brilliant- don’t have to agree on everything that they say- however a very interesting debate
Thanks for offering another perspective to the narrative of inclusion and accessibility that has been defining the contemporary zeitgeist in our nation.
From my perspective, it's the nature of everything to swing like a pendulum between two opposing forces, such as centralisation and decentralisation, liberalism and conservatism, and left and right, while spending very little time in the perfect balance that lies somewhere in between.
I agree with Ajay that there should be some revenue model around UPI. Organizations providing UPI services should be able to charge for services rendered as that will help them invest in dispute resolution and better customer services.
These men are extremely bright, honest and committed to the progress of the nation. No doubt. But here Mr. Shah has a missed the point that the govt has not ratified any monopoly positioning of the UPI or the JAM stack. This eco system came around when we were grappling with not just low quality of delivery but a terribly low penetration of any damn service by any public servants. We were in such a rotten shape, riven by corruption, societal inequity, fuedal impulses. The GOI said let's get started. Somewhere and will address even core issues one by one. They have to be more 360 degrees in their assessments before jumping to conclusions
Not true factually.
1. "we were in such a rotten shape, riven by corruption...the GoI said, let's get started somewhere "
The implicit assumption in your question is - getting started with all the great intentions and warrior like energy is enough to prevent all those malaises. Would you agree with this?
2. "Terribly low penetration of any damn service" - the implicit assumption here is - goi services in metropolitan cities or even Delhi NCR is spectacular and outside it is hell. Would you agree with this?
If you answer "yes" to my understanding of your implicit assumptions - you may wish to double check these assumptions.
They seem quite paradoxical to me. I am sure they will appear so to you as well.
If you're saying that UPI being a monopoly of the state is only "by chance" and only because the state machinery thought "bloody, let's get started somewhere", think again.
He gave an example of PayPal. But in US itself federal reserve felt the need to facilitate payments themselves. If competition is key then there was no need for fed to do this.
Paytm tried to remain relevant in sending and receiving money. But they found out quickly that they needed to pivot to open system.
He gave an another example of TCP /IP. It won the protocol was because it was seemless and open source.
Govt in India came set the standard made it an open system instead of dozen closed system.
Specifically on the topic of digital payments, is it possible that the pervasive lack of public trust in non-governmental entities when it comes to handling monetary transactions (eg: banks failing, fraudulent transactions being charged on cards) would anyway necessitate a state-imposed/sanctioned system for widespread adoption?
Lot of #Frauds happening on #UPI .
Inadvertently click something and its disaster all money gone in a swoosh 😢the banks say they can't do a damn to address any fraud that occured despite banks being the only players !
On 6th of july i am supposed to have clicked on some link saying ICICI imobile and money was tsken out of my account 3 rapid succession on 9th july😮😢
Any ideas how i could go about recovering it❤
How can
@ajay what’s your take on the proposed UPI market cap ?
Make an episode on public transit
+1
This would be great!
No one can PLAN for complexity, it is what they call BEING AGILE in developing side. System improves from feedback loops, yes there will be errors from which pain arises but as they say No pain No gain.
Government monopolies don't have feedback loops.
An example of the role of the state -- www.axios.com/local/san-francisco/2024/08/15/california-digital-drivers-license-apple-google-wallet
Is the reason why OnDC has not taken off because it lacks a business plan?
I am going to listen to the agriculture episode after this but wasnt the moral imperative of solving basic food needs of the population more important at the time of the green revolution? Diabetes epidemic is a better problem to have than a starvation epidemic?
UPI etc., are public goods in a sense that they are non-rival and non-exclusive if seen from the consumer pov. I agree, from the service provider point of view they are not a public good. But, in the context of someone making use of the UPI system, I would still call it a public good.
As a card carrying economist I object. We made the phrase Public Good and we defined it. You are welcome to call it a purple good or a stack good or whatever. Don't use a technical term in a wrong way.
@@ajayshah5705 Fair enough. In that case how - for instance, national security - is a public good? Not everyone can participate in it, even though everyone is being benefitted? Isn't it the benefit part that makes an entity a public good?
@@hdsih993hh May I point to
Ep 25 `Understanding the state', th-cam.com/video/jIilzNHgllg/w-d-xo.html
Ep 26 `When should the state act', th-cam.com/video/_CBIW4iU9Hw/w-d-xo.html .
Ep 33 on public choice theory, th-cam.com/video/2za-ovGsfFM/w-d-xo.html
Please read Kelkar & Shah 2022, www.mayin.org/ajayshah/books/isotr.html
@@ajayshah5705 thanks, will do!
A certain private event which caused terrible public inconvenience was termed a public event by the government. Orwellian
Yeahhh look at the states of roads in india specifically during the monsson time that answers what they were trying to explain .
One of the weaker episodes, imo. UPI has developed monopoly power because of how easy it is to use.
Please examine all the barriers that were put up against private rivals. Why is there no paypal in India?
Riffing off on Ajay Shah, I would say, also please verify the amount of RBI regulations that private wallet service had to comply with in terms of KYC etc.
UPIs raison d'etre seems unassailable, because our payment infrastructure is kaput. Be it wallets or payment banks(a joke of the first order)
The only reason UPI developed a monopoly is because no alternatives were allowed to compete by the state.
UPI might be the best, but we'll never know for sure because we never allowed anything else.
lol
Even VCs in Silicon Valley pitch India-like DPI to their govt.
I admire Ajay but he should stop taking delight in self-congratulatory contrarian takes.
VCs in silicon valley are not the paragon of policy thinking.