Ok. So, I found out about the new UPI fee the way I find out about most things now, which is a forwarded screenshot in a WhatsApp group with three exclamation marks and a voice note on top of it, and the claim was that every UPI payment was about to cost me zero point four percent. And I spent an hour reading the notifications and the government clarifications, and the truth turned out to be more boring and more annoying than the panic, because nothing is being charged to me and the shopkeeper down the road is going to be charged, which is the same trick this whole arrangement has been playing on the people standing behind a counter.

The details are worth putting down properly since so much of the shouting got them wrong, which is that the merchant discount rate returns on merchant transactions above two thousand rupees from the fifteenth of October, at zero point four percent, with nothing charged to the person paying, everything up to two thousand rupees staying free of bank charges, and credit card linked UPI payments exempted, and lawyers on the record saying that passing this fee on to a customer is a criminal offence. I am no expert so please take this with a bag of salt, but I read the fine print twice. So the viral version of the story was wrong in the way viral versions usually are, and the substance underneath it survived just fine, which is that a new cost has been created and placed on the smallest shoulders in the chain. In plain English; you pay nothing at the till, the shop next door pays a little on every big sale, and the law stops the shop from telling you about it.

The sentence every article carries is that the network needs to be maintained, and I want to take that seriously for a moment because the network is not imaginary, since it runs on servers and switches and cloud contracts and settlement systems and an engineering payroll and a fraud engine that has to be awake at three in the morning, and somebody does pay for all of that today. My objection is about where the bill was sent, and the wrongness of that becomes obvious the moment you look at what the state does with actual money.

Because the state already pays to run cash, which is the point nobody in this debate seems willing to make, since the Reserve Bank prints every note and mints every coin and replaces the soiled ones and moves them into every district of a country of a hundred and forty crore people, and that machinery costs thousands of crores a year and not one citizen is ever invoiced for it. The difference between what a five hundred rupee note costs to print and what it says on its face is the state’s own revenue, and the state collects it when the surplus comes to the exchequer, which was a record two point six nine lakh crore in the last transfer I saw reported. And every rupee that moves through a phone is a note that did not have to be printed and trucked and guarded and destroyed, so the biggest single beneficiary of UPI is the same institution now asking a chai stall to pay for the rails. Its so sad to see.

The other thing worth remembering is that none of us chose this, because on the eighth of November 2016 the government pulled eighty six percent of the currency out of circulation overnight and left a hundred crore people queueing outside banks, and out of that mess came a country that learned to pay by QR code, with the push coming from every direction at once since the banks wanted the float and the government wanted the visibility and the platforms wanted the customers. And the pitch was that this is the future and it costs nothing (or atleast it seems). I use UPI a hundred times a month and I am not going back, and the part I keep chewing on is the sequence, because the country was moved onto a rail by force and subsidy and then told that the rail has expenses, which is a thing you say before people build their lives around something.

Then there is the arithmetic of an actual Indian shop, which is where this becomes cruel, because a shop running on a ten percent gross margin that sells something worth five thousand rupees earns five hundred rupees on that sale, and four tenths of a percent of the sale value is twenty rupees, which is four percent of the profit on that transaction. And if the shop is running on six percent margins the same fee takes almost seven percent of the profit, and that is before rent and electricity and salaries and the stock that spoiled. The reason small shops in this country never warmed to card machines was precisely this, since cards arrived with a two percent fee attached and the fee was bigger than the margin, and the answer the country found was to make UPI free for everyone, which is why a million QR codes appeared on a million walls. Any fee at all on the value of a sale is a fee on the number that never shrinks, since turnover happens whether the profit shows up or not.

The detail that feels almost designed is that the merchant is forbidden from recovering it, because passing the charge to the customer is an offence, so the cost is real while the recovery is illegal, and the customer cannot even be told about it in a way that holds. Now put refunds next to that, because a customer who buys something and returns it gets the money back and the shop has to reverse the sale, and in the card world the fee charged on the original transaction is not refunded with the goods, so the merchant ends up paying for a transaction that was undone. What-if the new UPI fee behaves the same way when a sale is cancelled? I have not read a single clear answer about that, and the silence in a country that sells a billion things a month is the part that makes me nervous.

So the relief that nothing is being charged to me only holds at the receipt, and the ledger tells a different story, since a shop that pays twenty rupees on a five thousand rupee sale has two options and both of them land on me, and one of them is to add the cost into the price of the goods and the other is to shave the quality or the service until the cost is gone, and the transaction fee does not vanish when the law forbids the merchant from showing it. I would honestly prefer to see it, since I would rather hand over five extra rupees and know why than have the whole market get quietly four tenths of a percent worse at everything it does.

The part of this that I cannot get past is who built the rail, because the country now runs every petty payment in the country through a single operator, and the National Payments Corporation is owned by the banks and supervised by the regulator and has no competitor worth the name, and the central bank’s own attempt to license rival umbrella entities years ago went quiet and left one umbrella standing in the rain. That is a wonderful way to get universal adoption and a rather lazy way to get a price, since a single operator with no alternative on the other side can announce any number and the country has no move except to pay it. And if the intent had been to let the market fund the network then the honest path was to license four or five of them and let them fight over the merchant and let the cost fall to whatever it really costs. What we have is a monopoly that was built by committee and is now being asked to price itself, and the merchant is the only party at the table who did not get a vote.

There are only three honest ways to pay for a payment rail, which is that the state funds it out of the money it saves on printing cash, or the merchant funds it out of the sale he just made, or the buyer funds it at the till, and we have chosen the middle one by notification. And that choice has the least accountability in it since the merchant cannot refuse or surcharge, and cannot even complain loudly without sounding like the villain of the story. If the state cared about the network and cared about small business at the same time, the ledger is sitting right there, because the printing presses exist mostly for the transactions that UPI took away, and every year the country uses the phone where it once used a note, the seigniorage gets a little smaller and the case for making the merchant the funder gets a little thinner.

This is the same shape as almost everything else I have written about this year, which is the citizen who already paid once being asked to pay again for the thing that was promised in exchange, and I wrote a few days ago about a middle class that pays for both ends of this country and gets a footpath it cannot walk on, and this is the same story in a smaller font, since the vegetable seller earns too much for a scheme and too little to hire a lobbyist and is now the designated sponsor of the infrastructure everyone else uses for free.

I am not going to stop using UPI, because the alternative is worse and the habit is set, and what bothers me has almost nothing to do with the twenty rupees, which is a coin, since the thing that stings is the way the country keeps promising free and then remembering the bill a few years later once everybody has rearranged their life around the promise. Four tenths of a percent is a rounding error on a spreadsheet in a room in Delhi and it is a slice of a day’s margin at a counter in Indiranagar, and the distance between those two rooms is the only thing that has ever really decided what happens in this country.

Tweet to me the fee you never noticed you were already paying. I am @troysk704.