UPI is not set in stone
1 min read 29 Mar 2023, 11:37 PM ISTIt is not true that a fee has been levied on regular bank account-to-account transfers via the Unified Payments Interface (UPI)
PremiumIt is not true that a fee has been levied on regular bank account-to-account transfers via the Unified Payments Interface (UPI). But come 1 April, payments above ₹2,000 done using prepaid payment instruments on this platform, which make up a tiny sliver of its usage, will no longer be free. On these, the bank of the merchant accepting payment will have to shell out an interchange fee of 0.5%-1.1% to the payer’s bank. Of course, the charge will probably be borne by the party with less bargaining power. While this new levy will not make a difference to the overwhelming bulk of UPI users, it marks a significant first step towards cost recovery for India’s digital public infrastructure. Though online transfers have been democratized by UPI, which serves the goal of going cashless to the extent possible, it has been clear that this process can’t be subsidized for much longer now that transaction volumes have exploded. Such a financial model isn’t sustainable. More importantly, our approach to online transfers needs a rethink in the context of a central bank digital currency currently being tested. Don’t let the success of UPI get in the way of India’s e-rupee, which is a truly revolutionary innovation.
