India Paves the Way For Charging Merchants a Fee On UPI Transactions (bbc.com)
- Reference: 0185034612
- News link: https://news.slashdot.org/story/26/08/18/0812245/india-paves-the-way-for-charging-merchants-a-fee-on-upi-transactions
- Source link: https://www.bbc.com/news/articles/c8xnwqe00v1o
> For most Indians, paying by Unified Payments Interface (UPI) has become almost absurdly routine. Scan a QR code, tap a few buttons and the money moves instantly. There is no card machine, no cash, and -- most importantly -- for the user, no visible fee. That may be about to change. India has [1]paved the way for banks and payment companies to [2]charge merchants a fee on UPI transactions , potentially ending a decade-long experiment in free digital payments.
>
> The government has yet to decide the rate or exactly where it will apply, but proposals under discussion include a merchant discount rate (MDR) of 0.3-0.5% -- a small fee paid by a business to the banks and payment companies that process its UPI payments -- on larger transactions at big businesses. The government says consumers and person-to-person UPI payments will remain free. If merchant fees are introduced, they will apply only to some transactions above a set threshold, at a nominal rate, meaning most UPI payments will remain free. The question is whether putting a price on UPI could weaken the network that made it such a success.
>
> The stakes are enormous. Launched in 2016, UPI has grown into one of the world's biggest real-time payment networks. According to official data, in July alone, there were 23.6 billion UPI transactions worth 29.87 trillion rupees ($313.5 billion). Fintech apps such as PhonePe and Google Pay account for most UPI payments. In the financial year just ended, the figure was about 241.6 billion transactions -- almost 12,000 times the volume in UPI's first full year. More than 550 million people now use it, and the system is now available in some form for payments in 11 countries outside India.
India's UPI became ubiquitous partly because it made digital payments almost frictionless for merchants, including small vendors who can accept payments with little more than a QR code. New research suggests that merchant acceptance was "not just a result of UPI growth, but one of its key drivers."
As RBI governor Sanjay Malhotra put it, "Someone will have to pay the cost." The challenge will be making UPI sustainable without weakening the merchant network that helped it take off.
[1] https://thewire.in/banking/lok-sabha-passes-bill-allowing-govt-to-permit-banks-others-to-charge-for-upi-transactions
[2] https://www.bbc.com/news/articles/c8xnwqe00v1o
The first hit is free... (Score:2)
... and now that you're addicted to the convenience, here comes the rent seeking.
And That Is The End Of That (Score:2)
I had been singing the praises of UPI and holding it up as a model for other countries to copy. It is an excellent system that was proving to work really well. But, it was free and frictionless.
Now they are going to start charging for the service and eliminate one of the key factors that made it a viable option against credit cards. This is a stupid decision on India's part. I'm really curious to see how the merchants take it. Also, what about person to person transactions?
Really late in the process of rollout (Score:2)
They should have addressed the eventual charge for executing the payment up front and earlier by making it clear it was all an initial experiment. No one of any intelligence imagined that there is not a small cost to the banks to execute the transaction itself, although it is likely a very small amount per transaction (probably only a few rupees) for values under the various reporting thresholds (where the costs of the transaction goes up due to the additional overheads at the bank).
Charging now, for somet
tax the rich (Score:2)
As they benefit from the improved economy. Call the payment network public infrastructure
Typical. (Score:2)
Make a good system that's free. Let it become the standard. Then start charging for it. Boy.... it's exactly the same way a lot of companies in the US work. I'm surprised we can still even view PDF files for free.
Re: (Score:3)
I think the problem is that the first step is actually "Make an expensive system that's free to use, that we don't know how to sustainably pay for."
Re: (Score:3)
It's fairly simple. If it's that important as service, use government tax revenue to fund its function. If a hot economy is what they want and this helps the money flow, let the rich who can afford the taxes and benefit the most off of that hot economy pay for the privilege.