Soon UPI Transactions Will Become Chargeable in Digital India
For some years, India embraced the instant digital P2P transfer of funds using Unified Payments Interface by NPCI (national Payments Corporation of India).
We have got used to using apps like PayTM, PhonePe, TruecallerPay, BHIM, Mobikwik, GooglePay, SamsungPay etc. These apps are so easy to use to transfer funds to a friend, for online or offline shopping with their merchants, utility bill payments like electricity & water bills, telephone & mobile bills, mobile recharges, credit card bills etc. The best part was that these transactions were free to do.
With time, these apps have penetrated across India and have become ubiquitous. As many as 139 banks are offering UPI payments today. With about 4 billion transactions and INR 6 trillion of value exchanged in a year, it has developed into a huge market now. According to NPCI, last month alone saw 800 million transactions with about Rs. 1.33 lakh crore value exchanged.
International companies have also entered this space and are offering their UPI apps like GooglePay, Truecaller Pay, Samsung Pay etc. Last month, Chinese company Xiaomi also entered with its MiPay integrated on all its mobile phones. India is the second largest smartphone market with over 430 million smart phones in use. With 28% share, Xiaomi has the largest market share of smart phones in India. So Mi Pay may give a tough competition to current market leader PayTM.
Apple Pay couldn't enter this market yet due to stringent security requirement of storing encrypted data in a server in India.
Recently, some banks have started sending notifications to their customers for new terms for applicable charges on UPI transactions. Kotak Mahindra bank has intimated that they are going to charge as much as Rs. 5 per transaction for P2P transfers from 1st May, 2019. However they say that first 30 transactions will be kept free every month.
After Crypto Exchanges, P2P Exchanges Will Bear the Brunt
It's noteworthy that only P2P transactions are going to attract these charges. Transactions like merchant payments, online shopping, bill payments, etc. are kept out of the purview of these new charges. Transactions using IFSC code and Bank account no. will come under the purview of these new charges.
So far, UPI payments were an easy mode to complete buy & sale transactions of cryptocurrencies in India. Since Indian crypto exchanges can't trade fiat to crypto or vice-versa; P2P exchanges was the only mode available to Indian crypto community.
Most exchanges are already struggling with low volumes. So it will be interesting to see what impact this new limitation will have in the crypto industry here.
I feel, this is just the start and these charges will be revised upwards soon. According to Kotak Mahindra Bank, these charges will be applicable across all platforms including Paytm, PhonePe, Google Pay & Truecaller Pay. Mi Pay has collaborated with ICICI bank but just like Kotak Mahindra Bank it is also planning to introduce charges.
But this will surely impact the userbase for each of them
Yeah, if not the current userbase, it will at least have some negative impact on the high growth rate this segment has seen so far
But it won't see much impact until charges are increased drastically. According to sources, 95% of users do less than 30 transactions a month. So these users won't be affected largely ...of course, it can set a barrier for increasing the no. of transactions per user. Let's see how it works out.
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