Will merchants absorb the cost of UPI transactions? Fintech industry faces a dilemma – The New Indian Express

Of Express News Service

BENGALURU: Even as the government clarified that there would be no charges on UPI transactions, the fintech and banking industries are in a quandary if the costs incurred can be absorbed by merchants.

Muralidharan Srinivasan, head of payments, APMEA region, FIS, a fintech company, feels that as UPI (Unified Payments Interface) brings immense benefits, including cost savings for commerce, a nominal cost can be absorbed by merchants,

Currently, there is no cost impact of UPI transactions for the consumers and Srinivasan said that a nominal cost absorbed by merchants can to some extent offset the huge service cost incurred by the UPI stakeholders.

“Otherwise, sustaining the scale and development of UPI in the long term may be a challenge,” he said.

On Sunday, the Ministry of Finance clarified that there is no consideration for imposing UPI transactions.

This clarification comes a few days after the RBI launched its discussion paper on fees in payment systems such as NEFT, IMPS and RTGS. UPI is both a money transfer as well as a merchant payment system.

The government has imposed a zero-fee framework for UPI transactions with effect from January 1, 2020.

This means that the costs in UPI are zero for users and merchants.

RBI has sought feedback saying that if UPI transactions are charged, should the MDR (merchant discount rate) for them be a percentage of the transaction value or should a fixed amount irrespective of the transaction value be required?

As reports circulated that the government may charge fees on UPI transactions, the finance ministry soon clarified that it would not charge for UPI services.

The government treats it as public goods to be paid for by the private sector. They feel that the private sector is generally benefiting from the digital push.

So they should absorb these costs,” said a top official from a fintech association.

Meanwhile, Payments Council of India chairman Vishwas Patel said that all the support money given by the finance ministry has been granted by the banks only.

In his reply to the finance ministry’s tweet, he said, “No single bank has even a significant single-digit volume in UPI. None of the payment aggregators or facility providers received anything.”

In its discussion paper, the central bank said: “Along with safety and security, the affordability of fees is an important criterion for wider acceptance of digital payment methods.”

</p> <p>BENGALURU: Even as the government clarified that there would be no charges on UPI transactions, the fintech and banking industries are in a quandary if the costs incurred can be absorbed by merchants. Muralidharan Srinivasan, Head of Payments, APMEA Region, FIS, a fintech company, feels that as UPI (Unified Payments Interface) offers immense benefits, including cost savings for commerce, a nominal cost can be absorbed by merchants. Currently, there is no cost impact for UPI transactions for the consumers and Srinivasan said that a nominal cost absorbed by merchants can to some extent offset the huge service cost incurred by the UPI stakeholders. “Otherwise, sustaining the scale and development of UPI in the long term may be a challenge,” he said. On Sunday, the Ministry of Finance clarified that there is no consideration for imposing UPI transactions. This clarification comes a few days after the RBI launched its discussion paper on fees in payment systems such as NEFT, IMPS and RTGS. UPI is both a money transfer as well as a merchant payment system. The government has imposed a zero fee framework for UPI transactions with effect from January 1, 2020. This means that the fees in UPI are zero for both users and merchants. RBI has sought feedback saying that if UPI transactions are charged, should the MDR (merchant discount rate) for them be a percentage of the transaction value or should a fixed amount irrespective of the transaction value be required? As reports circulated that the government may charge fees on UPI transactions, the finance ministry soon clarified that it would not charge for UPI services. The government treats it as public goods to be paid for by the private sector. They feel that the private sector is generally benefiting from the digital push. So they should absorb these costs,” said a top official from a fintech association. Meanwhile, Payments Council of India chairman Vishwas Patel said that all the support money given by the finance ministry has been granted by the banks only. In his reply to the Finance Ministry’s tweet, he said, “No single bank has even a significant single-digit volume in UPI. None of the payment aggregators or facility providers received anything.” In its discussion paper, the central bank said: “Along with safety and security, the affordability of fees is an important criterion for wider acceptance of digital payment methods.”<br />