UPI may be free for customers and merchants, but banks and other participants in the UPI ecosystem still bear the cost of processing these transactions.
Industry estimates suggest that the overall cost of running the UPI ecosystem could be around ₹15,000–₹20,000 crore per year.
Based on the huge volume of UPI transactions, this works out to roughly 5–10 paise per transaction as a broad estimate.
This cost includes technology infrastructure, servers, cybersecurity, fraud monitoring, NPCI/network-related costs, customer support and other operational expenses.
Therefore, if a bank processes 1 crore UPI transactions, the overall ecosystem cost attributable to those transactions could be roughly ₹5–10 lakh, although the actual cost for an individual bank can vary significantly.
The Parliamentary Standing Committee on Finance cited an industry estimate of around ₹20,700 crore as the annual operating cost of UPI. This cost is shared across different participants, including banks, NPCI, UPI apps/TPAPs, payment service providers (PSPs), technology companies and other ecosystem participants.
Banks bear a significant portion because they provide the underlying banking infrastructure, process transactions, maintain accounts, handle authentication, fraud prevention, disputes and customer support.
Due to such huge cost, experts believe that UPI may be chargeable in future.
