Key Takeaways
- India’s payments authority is consulting banks and payment firms on levying charges for large UPI transactions.
- The move follows a change in payments legislation allowing firms to charge transactions over 2,000 rupees.
- The fees could generate up to 100 billion rupees annually for the payments industry.
India’s payments authority is currently consulting with banks and payment firms to discuss the levying of charges on large transactions within the Unified Payments Interface (UPI) system, according to sources familiar with the plans.
The consultations come after India amended its payments legislation on Monday, permitting firms to charge for transactions exceeding 2,000 rupees (approximately $20).
All UPI payments have been free until now, and the change is expected to benefit banks and payment firms in India, which processed 24 billion UPI payments totalling $311 billion in August.
The agenda for Tuesday’s meeting includes determining the overall fees to be levied on payments to merchants and the split between banks, payment apps, and aggregators, according to two of the three sources.
Regulatory authorities, including the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI), are considering a 0.4% charge, but the final rate and the split have yet to be decided, the third source said.
While person-to-merchant transactions are expected to be monetized, peer-to-peer transactions will remain free, the sources added.
The move is anticipated to benefit companies such as Paytm and Pine Labs, while opening an additional revenue source for banks and boosting prospects for IPO-bound firms like PhonePe and Razorpay.
Analysts at Jefferies estimate that the fees could generate between 50 billion and 100 billion rupees annually for the payments industry.
India’s payments landscape is dominated by apps that have received significant overseas investment, such as Walmart-backed PhonePe, Alphabet’s Google Pay, Paytm, and Meta-backed CRED.
