73 percent users will stop using UPI if transaction fee is charged: Survey

The value of UPI transactions in India reached Rs18.28 lakh crore in February 2024. Image: Debarchan Chatterjee/NurPhoto via Getty Images

To understand the view of consumers on the issue of a transaction fee on payments made through unified payments interface (UPI), LocalCircles, a social media platform and pollster focusing on governance, public and consumer interest issues, surveyed 34,000 responses from citizens located in over 364 districts of the country. As per the responses, only 23 percent UPI users surveyed are willing to bear a transaction fee on payment, while 73 percent indicated that they will stop using UPI if a transaction fee is introduced. These responses come from users, half of which confirm making more than 10 UPI transactions in a month.

The survey also reveals that a significant reason why most people have embraced UPI is due to its lack of transaction fees. If a fee were to be implemented, many would either decrease their UPI usage or completely stop using it, depending on the fee amount. It also highlights that some platforms or merchants are already imposing convenience or transaction fees on UPI transactions, with 37 percent of UPI users mentioning experiencing one or more instances of such fees in the past 12 months.

In August 2022, the Reserve Bank of India (RBI) published a discussion paper suggesting a tiered charge structure for UPI payments based on different transaction amounts. Following this, the finance ministry clarified that there was no plan to impose charges on UPI transactions. However, consumers nationwide have reported certain platforms charging convenience or transaction fees for UPI payments. One common example cited by consumers is the Rs20 convenience fee imposed by Indian Railways Catering and Tourism Corporation (IRCTC) for UPI payments. Numerous other payment gateways have also been reported to charge transaction fees for UPI transactions, with some merchants passing these fees on to consumers.

Also read: Explained: Conversational UPI payments—the new way of making online transactions

Where cash was always considered king, digital transactions enabled by UPI have taken India by a storm. From high-end stores, to paan shops, even in the most remote parts of the country, one can find scanners for online money transfer. The report states that the value of UPI transactions in India reached Rs18.28 lakh crore in February 2024, with transactions per day increasing from 39.3 crore in January to 41.7 crore last month. This is despite the curbs put by RBI on Paytm which is one of the top three platforms in the country for UPI transactions.

Last week, fintech firms brought up the contentious issue of implementing a Merchant Discount Rate (MDR), which is the fee merchants are charged for payment processing services on various payment instruments, for UPI transactions in a session with Finance Minister Nirmala Sitharaman. These companies have long been advocating for MDR on UPI payments, arguing that they do not profit from such transactions.