A recent survey has revealed that most of India’s Unified Payment Interface (UPI) users may stop using the service if transaction fees are introduced. The survey, conducted by LocalCircles, found that 75 percent of users would likely abandon UPI if such charges were implemented, highlighting the potential impact on this widely used digital payment platform.
UPI has rapidly become a cornerstone of digital payments in India, with many people relying on it for a substantial portion of their transactions. According to the survey, 38 percent of respondents reported using UPI for more than half of their payment transactions, while 37 percent indicated that more than half of their total payment value is processed through UPI.
This data underscores UPI’s role as a preferred payment method for nearly four out of ten users, driven by its ease of use and widespread acceptance nationwide.
However, the introduction of transaction fees could potentially disrupt the growing dependence on UPI. The survey found that only 22 per cent of users are willing to accept any form of transaction fee on UPI payments, underscoring the urgency of this issue.
A significant concern among users is that if businesses are required to pay fees for UPI transactions, these costs will inevitably be passed on to consumers, similar to how credit and debit card fees are handled. This could make UPI less attractive, particularly for small businesses and individual consumers who rely on it for cost-effective transactions.
The possibility of introducing a Merchant Discount Rate (MDR) for UPI transactions has also sparked worries among users. Many fear that charging merchants an MDR could lead to higher costs for consumers, which might deter them from using UPI as their primary payment method. Given UPI’s current popularity and its role in facilitating digital payments across urban and rural areas, this potential shift in consumer behavior could have widespread implications.
The survey, conducted from mid-July to mid-September 2024, gathered responses from over 44,000 people across 325 districts in India. The participant pool was diverse, with 65 percent men and 35 percent women representing both urban and rural regions.
The findings suggest that any move to introduce fees 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 continues to play a vital role in India’s digital economy, the potential introduction of transaction fees raises essential questions about the future of this payment method.
The strong user preference for fee-free transactions highlights policymakers’ and stakeholders’ need for careful consideration, potentially altering the current. The introduction of transaction fees could disrupt the growing dependence on UPI. The survey found that only 22 percent of users are willing to accept any form of transaction fee on UPI payments, underscoring the urgency of this issue. Ensuring that any changes do not undermine UPI’s widespread adoption and utility is crucial, highlighting the weight of their decisions.
