Will charging P2P payments result in a decline in UPI transactions?

There was a time when videos of roadside vendors in rural India accepting GPay payments would go viral.

Not anymore!

UPI is growing exponentially in every corner of India, clocking 5.58 billion transactions in April 2022, the highest number of monthly UPI transactions ever since its launch in 2016. It also recorded a 10% month-on-month growth not only in total transactions but also in value.

But how is India using UPI?

Peer-to-peer (P2P) transactions - 82% of total UPI transactions*

Peer-to-merchant (P2M) transactions - 18% of total UPI transactions*

*As per NPCI data (April 2022)

This brings up a few other questions.

Will UPI payments be charged at some point?

Currently, P2M transactions (online shopping, bill payments, merchant payments) are not charged. However, it is speculated the P2P transactions may be actively charged.

Why charge P2P transactions?

Banks want to avoid cost implications associated with small-ticket transactions. This is because the cost per transaction remains high even for low-value transactions and a charge acts as a deterrent in this case. In fact, some private banks have begun charging users for more than 20 transactions/month.

Will we see a decline in UPI transactions as a result?

Experts believe that charges will not impact how the country uses UPI because very rarely do most users exceed 20 or 30 transactions in a month. With P2M transactions remaining free of cost, there are no major hurdles expected to stop the UPI juggernaut.

We reckon UPI will continue to be the go-to payments option in India.

UPI growth momentum is unabated!

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That's it for now. See you again soon with all the need-to-know fintech updates!

Stay tuned. Stay curious.