Key Points
Given its consistently high rate of growth, National Payments Corporation of Indias (NPCI) stated ambition of crossing 1 billion daily transactions is looking more achievable with each passing month..
When it was first launched, most people thought that Third Party Application Providers (TPAPs), the entities we use to access the digital payments ecosystem (Google Pay, PhonePe and the like), would simply levy a fee on UPI transactions akin to the merchant discount rate (MDR) that credit card companies charge..
However, in 2019, the government prohibited banks and other service providers from imposing charges of any sort on UPI paymentseffectively preventing TPAPs from using UPI-transaction fees as a revenue model..
It is to address this problemto ensure that the benefits of the digital payments ecosystem extend to small-ticket transactionsthat the government kept UPI free of such a charge..
Not only will this put the entire UPI ecosystem back on a path to profitability, it would do so in a way that does not harm the societal objective of enabling deeper penetration of digital payments..
