Nikhil KamathIf UPI Is Free, Who Pays for It? | PhonePe, Razorpay & NPCI | WTF is Payments?
At a glance
WHAT IT’S REALLY ABOUT
Inside UPI’s “free” payments: costs, rails, regulation, and what’s next
- The episode traces how India’s payments ecosystem evolved into UPI and unpacks who pays the real costs when consumers experience UPI as ‘free.’
- Sohini Rajola outlines NPCI’s structure as a Section 8 not-for-profit and explains UPI’s multi-party design, risk controls, and settlement mechanics.
- Harshil Mathur shares operational lessons from early large-scale e-commerce payment failures and explains the cost structure differences between UPI transfers and card payments.
- The panel debates India’s regulatory posture—arguing overregulation and weak enforcement create fear—alongside disagreements on whether market-share caps are appropriate for UPI apps.
- The conversation expands into future rails and products, including cross-border payment models, stablecoins vs CBDCs, agentic payments frameworks on UPI, and wearable/NFC form factors.
IDEAS WORTH REMEMBERING
5 ideasNPCI operates as a not-for-profit rails builder with bank/fintech shareholders, not a dividend-returning company.
Sohini Rajola describes NPCI as a Section 8, not-for-profit entity formed by RBI and IBA, initially funded by 10 banks, and now funding its technology and infrastructure through internally generated surplus rather than shareholder dividends.
A ‘simple’ UPI payment is a multi-actor, multi-API, fraud-checked orchestration.
Sohini Rajola explains that UPI involves multiple parties (app/TPAP, PSP/sponsor bank, NPCI, sender/issuer bank, receiver bank) and that a typical transfer triggers roughly 10 API calls executed in milliseconds, with additional fraud/risk checks at the app layer and at NPCI’s ecosystem level.
UPI may be free to users, but banks and intermediaries still bear transaction and infrastructure costs.
In the P2P example discussed, the customer is not charged, but the issuing bank pays the PSP bank a slab-based fee (Harshil Mathur says it can cap at 50 paise), justified as a service cost offsetting alternatives like ATM/branch usage; speakers emphasize there’s real infrastructure and compliance cost across banks, apps, and NPCI.
Early Indian digital payments broke under peak loads and ambiguous success/failure states—driving new payment infrastructure priorities.
Harshil Mathur recounts the first Big Billion Day at Flipkart: very high traffic caused multiple bank core banking systems to go down, millions of card payment attempts failed, and ‘deemed success’ issues created cases where customers were debited despite gateway failure messages, forcing costly manual remediation.
Speakers see overregulation plus weak enforcement as a core brake on innovation and trust.
Harshil Mathur argues India frequently ‘invites’ regulation into areas where it needn’t be, creating fear and slowing innovation; multiple speakers link weak/slow legal enforcement to lower trust and a tendency to over-regulate rather than punish wrongdoing effectively.
WORDS WORTH SAVING
5 quotesThe entire history of money has been one move, repeating. Money keeps getting lighter.
— Nikhil Kamath
UPI is a great example. I was there on ground zero. There was maybe 20 people responsible for it.
— Harshil Mathur
The pride has to be in the pride of the quality of your work, right? Like quality of work at every level, and we don't see that, right? This whole jugaadu mindset which has been celebrated so often.
— Sohini Rajola
As I have gotten older, I have come to realize that it's guilty until proven innocent.
— Nikhil Kamath
We have to work very, very inefficiently. And therefore, we work very, very hard to not get much productivity.
— Harshil Mathur
High quality AI-generated summary created from speaker-labeled transcript.
