With the advent of the Unified Payment Interface, transactions in India have become a breeze. UPI payments are easily done in a few seconds by just typing a code. At the same time, a recent survey has revealed that if fees are implemented in relation to transactions, it will affect users in India.
A survey conducted by LocalCircles found that 75 per cent of users would likely stop using UPI if such charges were introduced, highlighting the potential impact on this widely used digital payments platform.
UPI has fast become the backbone of digital payments in India, and many people rely on it for a large portion of their transactions. According to the survey, 38 percent of people who participated in the survey said that they use UPI for more than half of their payment transactions. At the same time, 37 percent said that more than half of their total payment value is processed through UPI.
This data underlines the role of UPI, which is the preferred payment method for nearly four out of ten users, owing to its ease of use and wide acceptance across the country. However, the introduction of transaction fees could hamper the growing reliance on UPI. The survey found that only 22 per cent of users are willing to accept any kind of transaction fee on UPI payments.
A significant concern among users is that if businesses are required to pay fees for UPI transactions, these costs will essentially be passed on to consumers, similar to how credit and debit card fees are paid. This could make UPI less attractive, especially for small businesses and individual consumers who rely on it for cost-effective transactions.
The possibility of applying a merchant discount rate (MDR) to UPI transactions has also raised concerns among users. Many fear that allowing merchants to charge MDR could increase costs for consumers, deterring them from using UPI as a primary payment method. Given UPI’s current popularity and its role in facilitating digital payments in urban and rural areas, this potential change in consumer behavior could have wide-reaching implications.
The survey, conducted from mid-July to mid-September 2024, collected responses from over 44,000 people across 325 districts in India. The number of participants was diverse, with 65 per cent men and 35 per cent women, from both urban and rural areas. According to the survey, any move to levy charges on UPI transactions could lead to a significant decline in its usage, despite the platform’s current prominence in the digital payments landscape.
As UPI plays a vital role in India’s digital economy, the potential introduction of transaction fees raises important questions about the future of this payment method. Users’ strong preference for fee-free transactions highlights the need for careful consideration by policymakers and stakeholders to ensure that any changes do not adversely impact the widespread acceptance and usability of UPI.
