QR code has no royalty, UPI built on it has royalty

 

With the debate on 0.4% MDR reaching feverish pace, I reflected upon the royalty of the underlying architecture of QR code (upon which UPI payments are built). 

The QR code was invented in 1994 by Masahiro Hara at Denso Wave (a Toyota subsidiary). Denso Wave does hold patents on it, but made a deliberate decision early on not to exercise those rights against standard use of the technology — which is why QR codes could be freely embedded into UPI, Chinese mobile payments (Alipay/WeChat Pay), and thousands of other applications worldwide without licensing fees.

Imagine if Mr Hara (or, Denso Wave) would have charged a royalty of just 0.04% for QR code usage, how much would he have pocketed?

It is said that value of the UPI transactions per day is Ninety two thousand crore rupees. Given that here is a back of the envelope calculation:

Period Calculation         Amount

Per day Rs 92,000 cr × 0.0004 Rs 36.8 crore/day

Per year      Rs 36.8 cr × 365     ≈ Rs 13,432 crore/year

So on a single year's UPI flow alone, a 0.04% QR-usage royalty would generate roughly Rs 13,400+ crore (~$1.5 billion) — and that's just one year at one moment in UPI's growth curve. Applied cumulatively since UPI's 2016 launch (transaction value has grown from near-zero to ₹314 lakh crore annually), the number would run into tens of billions of dollars over the decade, since volumes were much lower in early years but compounding steadily.

Mr Hara left all that money on the table for the greater good of the community.

Compare this with what our government is planning to do. It has built the UPI system on top of QR encoding and now plans to encash on a system built on a free system. In my view, this is not ethically tenable. It is another matter that UPI payments were always touted as being made for the public good.

The above has an analogy with Creative Commons  (CC) licence: CC BY-NC-SA version rules say that you can copy and modify, but no commercial use.

I say a similar rule must apply to UPI payments which is built on 'Creative Commons QR Code'.