
Local Circles conducted an online survey to understand people’s reactions to potential transaction fees on Unified Payments Interface (UPI) transactions. The survey received responses from over 34,000 individuals across 364 districts, with a majority of male respondents.
Why People Use UPI:
- Many Indians are increasingly using UPI for various payments, from everyday purchases to bills.
- A key reason for this adoption is the absence of transaction fees associated with UPI payments.
Survey Findings:
- The survey revealed that 73% of respondents would stop using UPI if transaction fees were introduced.
- Only 23% of respondents were willing to bear such fees.
- Additionally, 37% of users reported experiencing transaction fees in the past year.
Industry Perspectives:
- Financial technology (fintech) companies have raised the issue of implementing a merchant discount rate (MDR) for UPI transactions.
- MDR is a fee charged to merchants for payment processing services.
- The Reserve Bank of India (RBI) had proposed a tiered structure charge on UPI payments in 2022 but later clarified that no such charges were planned.
- Despite this, some platforms have been charging convenience or transaction fees for UPI payments.
Transaction Volume and Limits:
- UPI transaction value reached Rs 18.28 lakh crore in February 2024, indicating its increasing popularity.
- The daily payment limit for UPI transactions is Rs 1 lakh, but the limit was raised to Rs 5 lakh for payments to hospitals and educational institutions in December 2023.
- From January 1, 2024, a 1.1% interchange fee applies to certain merchant UPI transactions above Rs 2,000 made using prepaid payment instruments.
Implications and Future Developments:
- To address payment fraud, a four-hour time limit will be enforced for the first payment exceeding Rs 2,000 to a new recipient.
- Soon, UPI members will introduce ‘Tap and Pay’ functionality to enhance user experience.