New Delhi: UPI launched in India is a digital payment system that is free to use for six years. All that’s about to change! As of October 15th, the regulations permit a small amount of 0.4% to be collected from shops for payments exceeding 2,000 rupees or around $21. More than 500 million people rely on UPI to make every purchase in India be it buying some tea on the streets or the iPhone must have.
This new fee is likely to generate significant additional revenue for both the biggest players in the market PhonePe and GooglePay. The two combined accounted for 80% of all UPI payment value last month, meaning that the two have the opportunity to clock in hundreds of millions of dollars in revenue each year.
The extra money will be used by the big guys to expand their business in rural India. While the larger UPI apps are likely to go with the strategy taken by others, the smaller ones are likely to go the other route. They can provide more lucrative transactions, like bill payments and online shopping, to entice customers and generate their own fees.
Bipin Preet Singh, founder of a smaller App, MobiKwik, said the move is an added impetus to continue investing in UPI. He thinks that the fee would help drive the payments business away from person-to-person payments toward person-to-business payments.
However, it’s not everyone who’s pleased about the change. In the payments sector, some investors feel the new rule may have arrived too late, and are concerned it could benefit larger companies over small. This has led to a question on the part of regulators- the extent by which a few companies can control such an integral payment system in India.
It’s the end of an era for UPI, which swelled in the last six years, partly in part of its no-cost use by all. However, now with fees comes into the picture, the dynamics of winning over the big players versus the small players in India’s payments industry is poised to become even more skewed.
