Mastercard CFO Casts Doubt on UPI's Financial Sustainability in India

Mastercard Inc's MA CFO, Sachin Mehra, recently expressed mixed feelings about India's Unified Payments Interface (UPI), a system that has revolutionized digital transactions in the country. 

While acknowledging its role in promoting digital transactions, Mehra highlighted the financial strain it imposes on ecosystem participants, including banks and financial institutions.

Also Read: WhatsApp's Payment Revolution: Meta Looks to Capitalize on India's In-App Payment Surge

UPI, a brainchild of a consortium of banks overseen by the Reserve Bank of India's particular unit, NPCI, has been a game changer in a country where card penetration is low. 

It facilitates over 10 billion transactions monthly, offering a cost-effective alternative to traditional card payments. However, the zero-cost transaction model has raised concerns about its long-term viability, TechCrunch reports.

With the backing of the Indian government and regulatory bodies, UPI has seen an exponential rise in adoption, accounting for approximately 56% of cashless payments in India. 

This has been a concern for global card giants like Mastercard and Visa Inc V, who find it challenging to penetrate a market dominated by a cost-effective and government-supported payment system.

Despite these challenges, homegrown companies like Paytm have innovated around the UPI framework. 

Paytm's soundbox, for instance, has become a crucial tool for merchants, offering real-time transaction notifications. 

This innovation has contributed to Paytm's revenue and opened up avenues for businesses to access cash flow data and extend credit to merchants.

However, the Indian government has lauded the shift to cashless transactions. The reduction in ATM transactions, currency printing costs, and increased tax collection efficiency are significant benefits that outweigh the operational costs associated with UPI transactions, TechCrunch reports.

Price Action: MA shares closed at $400.37 on Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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