Key Takeaways
- India has postponed a 0.4% fee on large UPI transactions until after Diwali.
- The fee, set to start on October 15, will now be implemented after the festival.
- Retailers and industry groups welcomed the delay, citing the festive season as a reason.
India has postponed the implementation of a 0.4% fee on large payments via the Unified Payments Interface (UPI) platform until after the Diwali festival, which will be celebrated on November 8. The National Payments Corporation of India (NPCI) announced the deferral, stating that the fee will be implemented immediately after the festival, though the exact date remains to be notified.
The proposed fee, which would end more than six years of zero-cost UPI payments, had faced opposition from retailers. The Confederation of All India Traders (CAIT), representing millions of brick-and-mortar retailers, welcomed the postponement, describing it as “timely and pragmatic.”
The decision to delay the implementation followed a meeting between around 20 trade industry representatives and India’s finance minister on September 30. The delay is expected to allow payments firms to upgrade their systems and address any issues retailers might face during the festive period, according to Reuters.
UPI is used by over 500 million people in India, facilitating transactions ranging from small purchases like cups of tea to larger ones like iPhones. Walmart’s PhonePe and Alphabet’s Google Pay hold about 80% of the market share by value of UPI transactions in August.
Shares of digital payments firms Paytm, Pine Labs, and One MobiKwik Systems gained 1%, 1.8%, and 1.3% respectively, following the news. Rahul Jain, director of research at Dolat Capital, stated that the delay brings certainty to the implementation of the Merchant Discount Rate (MDR) and is positive for the companies.
The postponement is seen as a pragmatic move, given the peak consumer spending during Diwali. Vishwas Patel, chairman of the Payment Council of India, an industry group, noted that the industry would be ready to implement the fee after the festive season.
Retailers and industry groups have expressed relief at the delay, with CAIT stating that the decision follows a meeting with the finance minister. The industry hopes that the postponement will help in smoother implementation of the fee during the festive period.
The delay is expected to benefit both retailers and digital payment firms, as it allows for better preparation and system upgrades. The implementation of the fee is seen as a step towards a more regulated and sustainable digital payment ecosystem in India.
