State funds to popularise digital payment appropriated by banks: PCI chief

Payment aggregators have received nothing, says Vishwas Patel as RBI discussion paper starts debate

Payment aggregators popularised the Unified Payments Interface (UPI) but they have hardly earned any money from it, said an industry representative on Monday in response to a finance ministry statement that the government has no plans to "levy any charges" for the service.

"The concerns of the service providers for cost recovery have to be met through other means,” said the ministry on Twitter Sunday. It was responding to a Reserve Bank of India (RBI) discussion paper suggesting that UPI payments could be subject to a tiered charge based on various amount brackets.

Vishwas Patel, chairman of industry association Payments Council of India (PCI) and executive director of Infibeam Avenues, said payment aggregators have suffered a collective loss of over Rs 25,000 crores in the last four years in promoting and popularising digital payments, especially UPI, installing point of sale (Pos) terminals and QR codes.

“…all the support money provided by the finance ministry has been appropriated by the banks only, (no single bank has even a significant single digit volume in UPI) … none of the payment aggregators or facility provider received anything,” he said on Twitter.

“A discussion paper seeking specific feedback has been released. The general industry view is that it [UPI] is a commercial activity, so it must be sustainable and profitable. Any business activity needs revenue. Having said that, one can discuss the quantum, proportionality of that quotient but zero revenue model does not work. The industry will perhaps give this feedback and then it's up to the RBI and the government to figure out what they want to do,” said a payment industry executive, on the condition of anonymity.

The finance ministry’s Twitter post said the government provided financial support for the digital payment ecosystem last year and has announced the same for the ongoing fiscal. In Financial Year (FY) 2021-22, the government allocated Rs 1,500 crore for "promotion of digital payments" that is used to reimburse the merchant discount rate (MDR) for RuPay debit card transactions, and BHIM-UPI transactions up to Rs 2,000. For FY23, the union budget provided Rs 200 crore for promoting digital payments.

The RBI’s discussion paper last week sought feedback from stakeholders on the possibility of imposing a tiered charge on payments made through the UPI, based on different amount bands.

“UPI as a funds transfer system is like IMPS. Therefore, it could be argued that the charges in UPI need to be similar to charges in IMPS for fund transfer transactions. A tiered charge could be imposed based on the different amount bands,” said the discussion paper. Currently, no cost is incurred by users or merchants in the case of payments made through UPI. But, for a person-to-merchant (P2M) transaction of Rs 800 on UPI, collectively, the stakeholders incur Rs 2 for processing the transaction, the paper said.

Payment industry participants have said they would welcome charges on UPI transactions, arguing it would be positive for them and help banks build better infrastructure for digital payments.