The imposition of a charge on payments to merchants made using the Unified Payments Interface (UPI) has evoked wide disappointment. As the government has emphasized, sellers must bear this fee, not buyers. Transactions of up to ₹2,000 are exempt, while the rest (barring a few special categories) will have to part with a 0.4% levy with a cap of ₹300.
This will be shared by payment apps and the banks hosting the accounts at both ends of the transfer. The rules also leave person-to-person payments charge-free. The fee is nominal, and while merchants may or may not sneakily raise prices to make up for it, it’s vital that this platform can sustain itself and isn’t starved of funds needed for cybersecurity and upgrades.
This is also the right time to popularize the central bank’s digital currency, the e-rupee, as an alternative. Although UPI is convenient, it involves banks. E-rupee wallets run by the central bank could let it work like cash, free of intermediary risk, since it has the same financial status as an ‘IOU’ issued directly by the monetary authority.
Also, the underlying technology of such digital currencies holds the potential to make it the money of the future, globally, and we must keep up.