Let me add one thing here though.
> Low cost of payment infrastructure to the banks
The cost is low primarily because it's is borne by tax payers [1] and the issuing banks. Issuing banks aren't too happy with forgoing a good chunk of their profits that they earn through issuing charges and also having to maintain the infrastructure free of cost.
A new for-profit payment consortium [2] has been proposed to compete with NPCI. Will be interesting to see how this plays out.
[1] https://www.business-standard.com/article/economy-policy/mdr...
[2] https://m.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3832
It obviously costs money to banks to maintain the infra that makes UPI possible. It still costs nothing for end users to use UPI. You know why is that? Because the Reserve Bank of India has mandated that. A central authority that grants banking licenses and oversees all banks in the country. Banks have to factor in the cost of supporting UPI as a regular cost of business. Banks actually may be saving money by supporting UPI because they don't have to deal with cash. They need less branches and ATMs, less people to handle all the cash.
You remove the central authority, and it becomes anarchy.
1. Change ownership structure. It was 75% owned by 10 banks in India, with no seats for other players in the industry.
2. Allow competition to NPCI. This got envisioned in the recent push for a NUE[0], but with a lot of caveats. RBI ended up deferring the plan[1]
3. NPCI also is pushing heavily to move from a non-profit to a for-profit model: https://www.livemint.com/news/india/npci-turning-for-profit-.... This will significantly change the current incentives it holds.
As an example of this conflict, RBI runs NEFT and RTGS for free as near-realtime transaction platforms for free, and now 24x7 (The 24x7 was a recommendation in the report). RBI does not charge banks for interchange on NEFT, but NPCI does charge for IMPS.
[0]: https://www.bloombergquint.com/business/npci-its-nue-competi...
[1]: https://inc42.com/buzz/rbi-defers-its-plans-to-distribute-li...
[x]: https://dea.gov.in/sites/default/files/watal_report271216.pd...
This is unlikely to end well.
Cash printing, distribution, and handling is super expensive. Replacing a big chunk of that with some servers and data costs would be a huge win.
Plus they get all that valuable data about what everyone is doing...
Don't know about India's central bank but US Fed plays with interest rates, bails out risk taking companies or their close friends creating moral hazard, prints money recklessly destroying your savings.
This means that a private player's implementation does not become defacto standard.
Multiple factors are aligning to make UPI successful:
1. Massive Mobile (smart phones) & Internet penetration
2. Cheap mobile data from telcos
3. Low cost of payment infrastructure to the banks and shops.
4. Fast clearing of payments (< 5-8 seconds)
5. Neutral standardisation body with blessings from the central bank
[1] https://www.npci.org.in/who-we-are/about-us