Is UPI Supposed to Charge? This has been the debate from across the length and breadth of India, much ahead of its debate, as a recent survey further showed that more than 75% of users would stop using the platform if charges were imposed. While some feel that these fees are must for sustainability in the long run, others foresee it driving users away from the most popular of digital payment modes in India.
Should UPI Charge Fees?
A second arm of the debate emphasizes the view of proponents of a fee for UPI, arguing it is only common sense that some minuscule transaction charge be imposed on UPI in order to maintain and upgrade its infrastructure. The platform has experienced growth on an unprecedented scale over recent years; however, banks and payment providers also need to benefit from the system. A small charge would serve to ensure the dependability of the platform and innovation for years to come.
A tiered fee structure for UPI that charges only on more significant value or business transactions would, in this author’s opinion, strike that fine balance. Charging small, daily payments would not then overburden the user while ensuring UPI grows strongly. For example, charging Rs 1-2 on transactions above Rs 500 may be acceptable to most users who use UPI for higher amounts or for business purposes.
Others recommend that while this may not reduce the number of user acquisitions, slight fees will keep the platform financially viable in the long term. Transaction volumes are shooting up through UPI, and a bit of this would also hit operational costs. The efficiency of the system would only progress with fees showing as the solution for it.
The Opposition: Will UPI Fees Send Users Running?
But the resistance is strong. The survey clearly suggests that the consumers using UPI are very sensitive to cost. No matter how small the fee may be, that could pose a disruption in the user base now. More than 75% of the respondents would stop using UPI; so there is a clear and present danger that it would start alternative payments, like mobile wallets, or even cash transactions.
The principal appeal of the platform for many would be zero-fee transactions, so it appeals to small, non-money transactions that most people have. Even low fees may act as a deterrent to users who live further afield, who already have low digital literacy, and who are unmotivated to get on board with digital payment systems in the first place. There is also the fear that small businesses and local vendors—the majority of whom deal in razor-thin margins—will have their pockets picked most by these fees, compelling them to resort to cash payments that are less efficient and harder to track.
Charges on the service have been opposed, as that would defeat the effort of a financially included India. For millions of Indians, UPI was their first experience with digital banking, and making it a costlier form of service may reverse the progress already made in building a cashless economy. All of the interior poor people, mainly dependent on low-cost transactions, may stop using the platform and may shift to a cash-based payment system involving lesser transparency and security.
Potentials Solutions: The Middle Ground?
There is an idea to find a middle way between both camps, with a hybrid model, which could charge business transactions and larger payments UPI fees but leave personal and low-value transfers free. This will help realise the mission of UPI for financial inclusion while forcing businesses and high-frequency users to carry part of the cost of using the system.
Another way is to charge for certain types of transactions, such as inter-bank transactions or expedited services. This would ensure that fees are exactly targeted, with the minimum intake on the normal users, while generating revenue from anyone who can pay for premium services.
Already, the prospect of introducing fee UPI has polarized opinions regarding the future of digitized payments in India. Fees may be essential to sustain the growth and the continued innovation that will eventually ensure UPI remains productive in the long run. However, fees may alienate a very significant percentage of users, especially those in rural markets and the informal sector, who have gone a long way in adapting to digital payments.
Of course, whether the government and National Payments Corporation of India (NPCI) weigh these factors heavily while deciding is yet to be seen. But a fair balance between not compromising on user satisfaction and ensuring financial sustainability will prove key for UPI to finally succeed in the long term. The debate at hand tells one thing, though-the UPI’s fate is being decided, and the world will see what lies ahead in terms of India’s digital economy.
