UPI Cost 0.25% Transactions Down 1% to 1389 Crore in June Despite 42% Budget Cut
Budget for promoting digital payments in India slashed by over 42%. This comes despite industry push for MDR (fee for UPI transactions) to cover processing costs (estimated at 0.25% per transaction). UPI transactions dipped slightly in June (1% down to 1.389 billion) but usage remains strong.
CONTENTS: UPI Cost 0.25% Transactions Down 1% to 1389 Crore
Digital payment incentive funding cut
UPI Cost 0.25% Transactions Down 1% to 1389 Crore
The budget allocation for incentivizing digital payments for the fiscal year 2024-25 (FY25) has been cut by more than 42%, down to INR 1,441 crore. This funding, intended for fintech startups and banks to promote RuPay debit cards and low-value BHIM-UPI person-to-merchant (P2M) transactions, was INR 2,485 crore in FY24, according to revised estimates.
This reduction aligns with the allocations made in the interim budget earlier this year. The current fiscal’s outlay is also 44.5% lower than the INR 2,600 crore in incentives announced for FY23. Additionally, no funds for promoting digital payments were included in the Union Budget 2024-25.
UPI MDR push despite budget cut
UPI Cost 0.25% Transactions Down 1% to 1389 Crore: The reduction in the budget comes despite repeated calls from industry stakeholders for the implementation of the merchant discount rate (MDR) regime for Unified Payments Interface (UPI) transactions.
Earlier this month, Amazon Pay India CEO Vikas Bansal emphasized that some form of MDR is crucial for smaller UPI players to “receive a fair share for the value they add to the payment ecosystem.” These demands are well-founded. A recent PwC report indicated that stakeholders, including the payer’s bank, the beneficiary’s bank, the UPI app provider, and NPCI, incur a cost of 0.25% of the total transaction value for processing a UPI P2M transaction.
UPI grows despite cost, slowdown
The report also highlighted that UPI stakeholders faced a charge of INR 12,000 crore for UPI P2M transactions between April 2023 and February 2024, as the payments infrastructure processed P2M payments totaling INR 4.5 lakh crore during this period.
Despite this, UPI usage continues to grow. In June, the payments infrastructure processed 1,389 crore transactions, a 1% decrease from 1,404 crore transactions in May. The transaction value in June was INR 20.07 lakh crore, which is 1.9% lower than May’s INR 20.45 lakh crore.
PhonePe led the market with a 48.3% share of UPI transactions in June, followed by Google Pay at 36.7% and Paytm at 8%.
Check out TimesWordle.com for all the latest news
You must be logged in to post a comment.