The price of convenience: What UPI has changed—and what it may cost us

To buy anything on Amazon or Nykaa, you can either prepay or link your UPI account. The money is then automatically debited according to your bill or the value of your order. Yet many people still choose to pay at the time of delivery. They take out their phone, open a payment app, scan a QR code, enter the amount and complete the payment. Why? I don’t have a definitive answer. Perhaps it is the psychological gratification of enjoying something now while delaying the pain of payment. Or perhaps people simply prefer to remain in control of the moment when money actually leaves their account. Whatever the reason, it is certainly an interesting subject for a behavioural psychologist.
One thing, however, is undeniable: UPI has changed our lives forever. No cards. No point-of-sale machines. No need to carry cash or worry about exact change. Anyone with a smartphone and a little training can make or receive a payment almost instantly. Before UPI became ubiquitous, debit cards were the preferred form of electronic payment for many Indians. Initially, their primary purpose was withdrawing cash from ATMs. As more merchants installed point-of-sale machines, people began using cards for purchases as well. There was, however, a fundamental difference between India and countries such as the US and UK, where credit cards have traditionally played a much bigger role. Credit allows people to spend today against future income. Indians, by comparison, have traditionally been more comfortable with the idea of earning first and spending later.
There is another fascinating behavioural aspect to digital payments: the separation between the pleasure of purchasing and the pain of paying. When we use a card or UPI, the pleasure of acquiring something happens immediately, while the psychological pain of parting with money is reduced or delayed. This can make spending easier. This may partly explain why cash remains culturally important in countries such as Japan and Germany. When you pay with cash, you physically see your money leaving your hands. Every purchase involves a small psychological reminder of its cost. There is also an economic argument that societies with greater reliance on credit tend to have lower household savings. But that does not make credit or cash inherently good or bad. The relationship between payment methods, consumption, savings and economic growth is far more complicated.
What is clear is that UPI has taken convenience to another level. It combines speed, accessibility and simplicity, and has brought digital payments to sections of society that traditional banking infrastructure could not reach as easily. There is also no realistic way of going back. But that raises an important question: who ultimately pays for this convenience? Technology is not free. Before UPI, debit and credit cards involved annual charges for users and transaction costs for merchants. Those costs were eventually passed on to consumers in one form or another. UPI makes payments feel almost free, but the infrastructure, technology, cybersecurity and banking networks required to operate it all have costs. Ultimately, users may have to bear some of that cost. But if we pay for convenience, we should also ask what conditions should apply to those running the system.
The biggest issue is data. Digital payments create enormous amounts of information about our financial behaviour—where we spend, how much we spend and what our consumption patterns look like. This data must be protected from misuse and unrestricted commercial exploitation. Convenience should not come at the cost of privacy.
Let me end with a personal story. Gita Didi (name changed) works as a domestic help in a neighbour’s house. Her husband is an alcoholic. Before UPI, she avoided taking her salary home because her husband would take the money and spend it on alcohol. For the past four years, she has been using UPI and sometimes goes for months without handling cash. Her husband is not literate enough to access her UPI account. For Gita Didi, going back to cash is simply not an option. When she heard that digital transactions might eventually carry a charge, she said she would happily pay. For her, the benefits of UPI far outweigh its financial cost.
Dipankar Jakharia
Guwahati