The FY25 budget has reduced UPI incentives to ~437 Cr, from 2k Cr in FY24, and credit is a fair bit away from paying for the ecosystem. MDR pricing on regular txns is needed to sustain the ecosystem
Government just annouced 1500cr incentive for UPI ecosystem. I guess they are still not ready for MDR. Why annouce it througha cabinet meeting and not in the budget? Lobbying by banks and TRAP?
I think everyone wants it - banks, NPCI, UPI Apps etc. From what I understand, the cabinet meeting was chaired by PMO, seems to be a push from the government to keep it free.
Also, not too sure what this aims to solve: the assumption has always been (even this piece) that the P2M txns < INR 2k will be free, so that smaller merchants (P2PM) are protected. It should only be > INR 2k that are charged, so announcing this as a subsidy to continue to promote < INR 2k txns doesn't make sense to me
Since merchants perceive fintech companies as charging exorbitant MDR for credit card transactions on UPI, they would feel less burdened if the payment gateway fees were passed on to customers. Additionally, for transactions below ₹500, customers are unlikely to notice or be concerned about this fee.
Fair point - I do agree, as a customer I don't mind paying a bit extra if its cheaper than other methods. There's probably a school of thought that thinks the opposite: pricing coming in may cause some end customers to revert to cash / other forms of payment (I don't think that this will be the case though, UPI has changed customer behaviour)
However, the view of the administration is they want to keep to free for the end customer, and don't want the trickle down to happen, and thats where part of the problem lies.
Great piece. There is so much I did not know, just saw the magic that happened on every qr code scan! Thanks for helping see the complete picture.
Thanks for shoutout, Ambika! hahah
Great piece, Ambika - would be great if you could share the report you've mentioned, along with the P2M calc sheet.
I'm at narasimhakanduri@gmail.com - thanks much!
Sure!
Government just annouced 1500cr incentive for UPI ecosystem. I guess they are still not ready for MDR. Why annouce it througha cabinet meeting and not in the budget? Lobbying by banks and TRAP?
https://economictimes.indiatimes.com/news/economy/finance/cabinet-approves-extension-of-incentives-for-upi-transactions-up-to-rs-2000-for-small-merchants/articleshow/119208063.cms?from=mdr
I think everyone wants it - banks, NPCI, UPI Apps etc. From what I understand, the cabinet meeting was chaired by PMO, seems to be a push from the government to keep it free.
Also, not too sure what this aims to solve: the assumption has always been (even this piece) that the P2M txns < INR 2k will be free, so that smaller merchants (P2PM) are protected. It should only be > INR 2k that are charged, so announcing this as a subsidy to continue to promote < INR 2k txns doesn't make sense to me
Nice, how about B2B payments that are high volume, can they be explored for monetization.
Wouldn't Customer Fee bearing model increase adoption of CC on UPI ?
Why do you say so? Do you mean that if the customer bears the fee, then more merchants will adopt it?
Since merchants perceive fintech companies as charging exorbitant MDR for credit card transactions on UPI, they would feel less burdened if the payment gateway fees were passed on to customers. Additionally, for transactions below ₹500, customers are unlikely to notice or be concerned about this fee.
Fair point - I do agree, as a customer I don't mind paying a bit extra if its cheaper than other methods. There's probably a school of thought that thinks the opposite: pricing coming in may cause some end customers to revert to cash / other forms of payment (I don't think that this will be the case though, UPI has changed customer behaviour)
However, the view of the administration is they want to keep to free for the end customer, and don't want the trickle down to happen, and thats where part of the problem lies.