分类： business

Since its 2016 launch, India’s Unified Payments Interface (UPI) has cemented its reputation as the backbone of the country’s digital economy, transforming how individuals and businesses transfer money and complete purchases. Now, a planned new fee for certain merchant transactions through the ubiquitous platform has ignited broad debate across India’s business and tech sectors, with conflicting views on whether the charge will sustain the system’s growth or undermine its widespread adoption.

The National Payments Corporation of India (NPCI), which operates UPI, announced Tuesday that starting October 15, a 0.4% Merchant Discount Rate (MDR) will apply to eligible UPI payments over 2,000 rupees ($21) made by customers to merchants. Critically, the regulation requires merchants to absorb the full cost of the fee, and explicitly bars them from passing the expense on to consumers. A separate flat 5-rupee fee applies to specific high-value merchant transactions including rail tickets, fuel purchases, telecom bills, insurance premiums and agricultural input payments over the 2,000-rupee threshold. For all other eligible transactions over 2,000 rupees, the 0.4% fee is capped at 300 rupees per transaction, limiting costs for very large payments.

The new structure carves out wide exemptions to limit disruption for most users. All person-to-person transfers remain free, no matter the transaction amount. All merchant payments under 2,000 rupees also stay free of charge, as do QR code-based merchant transactions in rural and semi-urban regions. According to the Indian government, roughly 96% of all person-to-merchant UPI transactions will remain entirely unaffected by the new fees, falling either below the threshold or into one of the exempt categories.

For years after UPI’s launch, the cost of building, operating and expanding the payments infrastructure has been covered primarily by the national government, partner banks and payments service providers. Indian officials frame the new MDR as a necessary step to keep the system sustainable for the long term. In an official press release, the finance ministry clarified that the MDR is not a government-imposed tax; all revenue collected from the fee will be distributed to payments providers, including banks, to fund ongoing operations, infrastructure upgrades, cybersecurity improvements, innovation and future expansion of the UPI network. The government argues that shifting to this market-linked pricing model reduces the burden on public tax revenue that currently covers UPI subsidies, placing the cost on the large businesses that derive the most benefit from the platform.

Despite these justifications, the policy has drawn sharp criticism from analysts and business leaders who warn it could raise operational costs for enterprises and discourage UPI adoption, particularly for larger transactions. Some social media users have pointed out that the zero-cost model has long been UPI’s biggest draw for both merchants and consumers, and introducing fees could erode its core advantage over cash and other payment methods. High-profile voices have echoed these concerns: former Indian government chief economic adviser Krishnamurthy Subramanian has questioned the existing framework’s private cost-benefit analysis, while prominent Indian entrepreneur Ashneer Grover warned in an interview with CNN-News18 that some small shopkeepers may simply refuse large UPI payments and demand cash instead, reversing years of progress toward digitalization.

Bipin Preet Singh, CEO of leading Indian fintech firm MobiKwik, has pushed back on that criticism, supporting the fee as a necessary investment in the system’s future. “When government funds the subsidies paid for UPI, that amount comes from tax payers’ pocket. Moving to market-linked pricing mechanism removes this tax burden and directly links the cost to large businesses which benefit from UPI,” Singh explained.

UPI’s growth over the past decade has been nothing short of revolutionary, cementing its status as the world’s largest digital real-time payments system by transaction volume. NPCI data shows that in August 2025 alone, UPI processed a record 24.51 billion transactions worth a total of 29.82 trillion rupees, approximately $311 billion. It is now a universal tool in India, used by everyone from street-side vegetable vendors to large corporate enterprises, and is credited with accelerating financial inclusion across the country. As the October 15 implementation date approaches, industry observers are closely watching whether the new fee structure will alter usage patterns, especially for large-value transactions, and whether it will strike the right balance between long-term system sustainability and accessible digital payments for all.

This month, Beijing rolled out a landmark set of new regulations targeting delayed payments to small and medium-sized enterprises (SMEs), with a little-noticed but transformative financing framework that is reshaping how credit flows through China’s industrial ecosystem. The policy pushes large corporate buyers to replace extended accounts payable with upfront cash payments to their SME suppliers, by enabling these large firms to access formal bank loans and bond financing to cover the costs – a structural shift that moves the working-capital burden away from smaller, more vulnerable suppliers and back to purpose-built credit institutions.

For years, extended payment terms have quietly functioned as an informal form of supplier financing across global supply chains, and China’s industrial sector is no exception. When a large buyer stretches out waiting periods for payment, the supplier is forced to front the full cost of production and delivery, carrying the entire cash flow strain for weeks or even months before revenue hits their accounts. Complicated financial instruments like commercial bills and electronic receivables have only amplified this pressure, turning a routine operational payment issue into hidden informal credit embedded deep within supply chain networks.

China’s new policy directly targets this uneven dynamic. The regulations mandate that all large firms must settle outstanding payments to SME suppliers within a maximum 60-day window. Central state-owned enterprises face particularly strict requirements to pay in cash, while large firms that maintain massive accounts payable balances despite holding substantial cash reserves have been flagged for enhanced regulatory oversight.

The most consequential piece of the reform lies in its underlying financing mechanism: Chinese regulators are actively encouraging domestic banks to extend new credit to large firms specifically to let them replace informal supplier credit with formal financial credit. In practice, this policy re-routes working-capital financing away from the small manufacturers that form the backbone of China’s industrial base, returning that function to the financial system designed to bear credit risk.

Fresh industry data underscores just how urgent this correction has become. By the end of July, China’s designated large industrial enterprises reported an average receivables collection period of 71.9 days. Private firms, which account for the vast majority of SME suppliers, faced an average wait of 75.6 days – nearly 20 days longer than the 56.2-day average for state-controlled enterprises. That gap makes a profound difference for manufacturing suppliers, where available cash flow directly determines a firm’s ability to invest in new equipment, expand production lines, and upgrade capacity to meet evolving industry demands. While stretching payment terms may improve a large buyer’s own balance sheet, the ripple effect across the entire industrial ecosystem leaves suppliers with weaker financial positions and less capital for growth investment.

This dynamic carries particular strategic weight for high-priority sectors including semiconductors, electric vehicles, industrial automation, industrial machinery, and advanced manufacturing. China’s long-term industrial ambitions rely on dense, interconnected networks of specialized SME suppliers, many of which require constant capital injection just to keep up with technological upgrades demanded by their large customers. As more working capital becomes trapped in unpaid receivables, the pressure eventually erodes the entire sector’s capacity to invest and grow.

The new payment rules come as Beijing moves to bolster the capacity of its formal financial system. Major state-owned banks and insurance providers are currently raising roughly 360 billion yuan in new capital, 300 billion yuan of which is backed by special central government bonds. The Agricultural Bank of China and Industrial and Commercial Bank of China alone account for 260 billion yuan of this new capital injection. This expanded capital base gives the financial system extra lending capacity exactly as regulators push large firms to swap supplier credit for bank loans and bonds. Taken together, the two policy moves form part of a broader effort to pull corporate financing out of supply chain interconnections and back onto the balance sheets of regulated banks and capital markets.

This shift matters because while accounts payable do not show up in official bank lending statistics, they still function as de facto credit. When a large company delays payment to a smaller supplier, it is effectively borrowing from that supplier. When this practice becomes widespread across the economy, the entire financing burden shifts toward smaller firms that typically have weaker bargaining power and far more expensive access to external capital.

Beijing’s policy addresses both sides of this imbalance: it strengthens the formal financial institutions that can provide affordable credit, while cutting down on the amount of working capital that small suppliers are forced to finance for large buyers. This represents a meaningful structural change to how credit circulates through China’s industrial economy.

If the policy succeeds, the first visible impacts will be shorter average collection periods, reduced receivables pressure, and stronger cash positions for private manufacturing SMEs. For global and domestic investors, this makes metrics including accounts receivable balances, average payment periods, commercial bill utilization, and supplier cash flow increasingly important indicators to track whether the reform is delivering capital to the small firms that need it to invest in growth. For analysts tracking B2B technology supply chains, key signals to watch include shorter payment cycles reported by large customers in quarterly disclosures, and improved cash conversion rates for suppliers even before revenue growth picks up.

The implications of this reform stretch far beyond financial markets, reaching into the core of China’s long-term industrial strategy. For years, Beijing has directed massive amounts of capital toward its priority industrial sectors, but the long-term strength of these sectors ultimately depends on whether the underlying supplier base has enough cash to expand capacity, absorb market volatility, and sustain continuous investment. When smaller suppliers are forced to finance their large corporate customers, capital ends up flowing in the wrong direction, undermining the goals of China’s industrial policy. The new rules represent a deliberate effort by Beijing to reverse that misallocation, moving working-capital financing back to banks and capital markets – the institutions built to carry that funding burden.

This analysis was written by Ron Honig, Co-CEO of From-Honig Family Office, who has more than two decades of experience in senior finance and operations roles in the global technology sector, including time at Intel. Honig writes regularly on semiconductors, macroeconomics, and capital allocation. The views expressed are his alone and do not represent the official position of From-Honig Family Office, and the article does not constitute investment advice or any recommendation for individual securities or investments.

A recent drone strike targeting Saudi Arabia’s critical East-West Pipeline has triggered major disruptions to global oil markets, with industry assessments indicating repairs could take five to six weeks to complete, according to senior industry sources cited by Reuters. The outage removes approximately 4 million barrels per day of Saudi crude – equal to 4% of total global oil supply – from international markets, sending energy prices soaring across the board at the start of the trading week.

On Monday, Brent crude, the global benchmark for oil pricing, climbed 3% to trade near the $108 per barrel mark. This upward momentum follows a sharp rally last week, driven by a rapid Houthi offensive that secured the group full control of Yemen’s side of the Bab el-Mandeb, a strategically vital Red Sea chokepoint through which millions of barrels of Saudi oil are shipped daily.

Market analysts warn that publicly quoted benchmark prices do not fully capture the extreme cost increases being passed on to commercial buyers, particularly for refined petroleum products such as diesel. Gregory Brew, a leading energy analyst at risk consultancy Eurasia Group, noted on social platform X that physical cargoes of Omani crude are currently selling for as high as $121 per barrel, while Murban crude loaded at the United Arab Emirates’ Fujairah port is trading at $131 per barrel – far above benchmark levels.

The sudden price spike comes at a particularly fragile moment for the global economy, which is already struggling to rein in persistent high inflation and adapt to sharply higher borrowing costs across major developed and emerging markets.

In comments made on Monday, former U.S. President Donald Trump pushed back against claims that rising diesel prices stem from the ongoing U.S.-Israeli military campaign against Iran, instead blaming attacks on energy infrastructure carried out by Russia and Ukraine. He added that the two nations have reached an agreement to temporarily halt such targeting operations.

New satellite imagery published by analytics firm Vantor on Sunday confirms extensive damage to a key pumping station along the East-West Pipeline at al-Mesabaah, located southeast of the Saudi city of Medina. Last week, Saudi officials stated the drone attack was launched from Iraqi territory, where a network of Shia-majority militias aligned with Iran operate. Both the Yemeni Houthi movement and Iraq’s Popular Mobilisation Forces (PMF) are part of Iran’s so-called “Axis of Resistance” alliance, though the Houthis exercise a greater degree of operational independence from Tehran than other member groups.

For both Iran and the Houthis, the disruption of the pipeline represents a significant strategic gain, as it lays bare critical security vulnerabilities in Saudi Arabia’s energy export infrastructure. The Houthis are seeking to leverage their recent battlefield gains to expand the territory under their control in Yemen, while Iran aims to strengthen its strategic dominance over the Strait of Hormuz, another chokepoint through which roughly 20% of global oil trade passes.

The East-West Pipeline has served as a critical bypass for Saudi oil exports for decades. Constructed in the 1980s during the Iran-Iraq War specifically to offer an alternative route around the Strait of Hormuz, the pipeline runs from Saudi Arabia’s giant Gulf coast oil fields to the Red Sea export terminal at Yanbu. In recent years, it has allowed Saudi Arabia to maintain roughly two-thirds of its pre-conflict export volumes despite a de facto blockade imposed by Iran on Gulf shipping through Hormuz, carrying 4 million bpd for international markets before the attack.

Beyond the immediate pressure on Saudi Arabia, the pipeline shutdown is also prompting warnings for other Gulf Cooperation Council states that have invested in alternative export routes to avoid dependence on the Strait of Hormuz. The United Arab Emirates currently operates a smaller pipeline that terminates at Fujairah on the Gulf of Oman to bypass Hormuz, but that infrastructure sits far closer to Iranian territory than Saudi Arabia’s East-West Pipeline, raising questions about its own vulnerability to similar attacks.

Against the backdrop of India’s unprecedented boom in digital finance, a striking and counterintuitive trend has emerged: as the country’s real-time digital transaction network Unified Payments Interface (UPI) surges toward 1 billion daily transactions, the volume of physical cash in circulation continues its steady double-digit growth. The Reserve Bank of India (RBI), the nation’s central bank, now manages a total of 176 billion circulating banknotes, printing 28 to 30 billion new notes across six denominations each year while retiring roughly 21 billion worn out bills – an enormous national logistics operation that demands constant planning and resource allocation.

This phenomenon, dubbed the “cash paradox” by RBI Deputy Governor Shirish Chandra Murmu, has presented a unique challenge to central bank planners. Speaking at a gathering of global central bankers in Jakarta last month, Murmu noted that while cash’s share of routine individual transactions has declined as digital payments gain widespread adoption, the total volume of currency in circulation continues to expand at double-digit rates. This unpredictable combination makes long-term forecasting of cash demand far more complex, complicating decisions around production capacity and distribution infrastructure.

To contextualize India’s massive cash stockpile, Murmu offered a global comparison: at the end of last year, the United States had roughly 56 billion dollar bills in circulation, while the Eurozone counted just 30 billion euro notes. One important caveat to this comparison is that India’s circulation count is inflated by a higher share of low-denomination notes, which require more individual bills to equal the same transaction value.

The puzzle of India’s growing cash supply is not that Indians still use cash – as recently as 2019, 94% of all consumer transactions were still cash-based, according to research by economists Anirudh Tagat, Mehmet Ozmen and Pushpa Trivedi. What confounds analysts is that cash volumes keep rising even as digital payments capture an ever-larger share of daily transactions. Economists point out this parallel growth of digital and physical money is not unique to India; Bank for International Settlements research shows the same pattern has played out globally since the 2007-2008 global financial crisis, and India is simply the most high-profile, large-scale case study of the trend.

Anirudh Tagat, an economist specializing in Indian payment behavior at the Mumbai-based Observer Research Foundation, explains that currency fulfills three core functions for consumers: it acts as a medium of exchange, a store of value, and a hedge against economic or systemic uncertainty. Digital payment apps have only displaced cash in the first of these roles, leaving the other two intact. That means rising digital adoption alone cannot eliminate demand for physical banknotes.

David Humphrey, a Florida State University economist who has studied cash usage across 14 global economies, notes that digital adoption is just one of many factors shaping cash holdings. For major reserve currencies, much of the growth in circulation comes from demand outside the issuing country, a trend seen clearly in the United States, where most high-denomination $50 and $100 bills are held and used overseas, rarely appearing in routine domestic transactions. Even as domestic ATM withdrawals for everyday spending – concentrated in small-denomination bills – have declined in recent years, the total value of U.S. currency in circulation continues to climb, driven by this international demand.

In India, one key structural driver of unrecorded cash growth is the large informal and underground economy. Illegal and underreported activity, from under-the-table property transactions to untaxed commerce, relies almost exclusively on untraceable cash. Even India’s 2016 demonetization policy, which overnight invalidated 86% of the country’s cash by value to crack down on “black money,” only eliminated existing illicit cash stockpiles, it did not address the underlying incentives that fuel ongoing under-the-table cash flows. Buyers and sellers in real estate still routinely underreport transaction values to avoid high stamp duties, settling the difference between the declared price and actual market value in untraced cash, leaving economists without any reliable estimate of how much unrecorded cash is held in the sector.

Psychological factors also play a role. Digital payment platforms are intentionally designed to remove the psychological “pain of paying” that comes with handing over physical cash, replacing the tangible loss of money with a simple satisfying notification. In theory, this should encourage more spending and further erode cash demand, but it has not – and analysts point to a quiet driver: fear of systemic disruption. Consumers hold cash as a buffer for when digital networks go down, power outages cut off online banking, or other crises disable digital infrastructure.

This trend mirrors what central bankers are seeing across Europe. The European Central Bank (ECB) has recorded growth in circulating euro banknotes from €1 trillion in 2016 to €1.6 trillion in 2024, even as cash’s share of point-of-sale transactions has fallen to roughly 50%. Like in India, the number of euro notes used for routine transactions is falling, but household holdings of cash as savings keep growing. ECB research has confirmed this same “banknote paradox,” driven by household hoarding and international demand for euros. Several European governments, including Germany, Austria, Finland, Sweden and the Netherlands, now formally advise citizens to keep a small stock of cash at home as a contingency for blackouts, cyberattacks, or even wartime disruption of digital systems. In short, cash is no longer primarily for everyday spending – it has been redefined as critical emergency infrastructure.

Beyond emergency preparedness, cash remains an essential tool for vulnerable populations that are often excluded from the digital finance ecosystem. University College Cork professor Olive McCarthy notes that elderly people, low-income rural communities, domestic violence victims who need to keep their finances private from abusers, and children learning about how money works all rely disproportionately on physical cash. Many consumers across income levels still simply prefer the privacy and tangibility that physical money provides.

For the RBI, this paradox creates a difficult policy and budgetary balancing act. The central bank maintains an entirely domestic, self-reliant supply chain for currency, including four paper mills, four banknote printing presses, and dedicated ink production facilities, while simultaneously championing UPI, the world’s largest and fastest-growing instant digital payment network used by more than 550 million Indians. Now, as the RBI finally begins trials of polymer 10 and 20 rupee notes – a reform first proposed a decade ago that would produce longer-lasting notes and reduce replacement costs – the central bank must decide how much capital and labor to allocate to maintaining its cash infrastructure versus expanding digital payment access.

Economists say the RBI has strong incentives to keep the cash system running even as digital payments expand. Murmu frames a reliable, widely available cash supply as a core component of India’s monetary sovereignty, and the rupee’s widespread informal use across South Asia means a stable cash supply acts as a regional economic shock absorber. If UPI follows through on reported plans to introduce transaction fees for small-value payments, analysts predict cash could even regain share in routine transactions, on top of its continuing growth as a savings and emergency asset.

The broader takeaway for policymakers globally is a humbling one: decades of rapid digital financial innovation have not rendered cash obsolete. Rather than being an outdated technology destined for replacement, cash has transformed into an insurance policy that few consumers or governments are willing to give up.