Ishan Sharma, head of growth at payments infrastructure provider Juspay, said: “I think the real growth of UPI was the enablement of the last mile – that was the real big win.”
He said that banks, payment apps and other providers face growing costs to keep UPI reliable and combat fraud.
“There is energy cost, server cost and a number of engineering talent required to build this stuff,” he said.
That is increasingly the government’s argument too.
In August, the Ministry of Finance said UPI’s rapid growth required continued upgrades in infrastructure, cybersecurity and fraud prevention, and that relying on subsidies alone was “not viable for the next wave of growth”.
SMALL FEE, BIG DIFFERENCE
For restaurant owner Jacob, even a 0.5 per cent charge could make a huge difference to costs.
Jacob estimated that UPI payments across his restaurants can reach 10 million rupees in some months. A 0.5 per cent merchant fee would cost the restaurant about 50,000 rupees a month.
For a business that keeps only about 7 to 8 per cent of its revenue as profit, that cost becomes significant, he said.
NRAI’s Kalra said a charge of around 0.1 to 0.2 per cent could potentially be absorbed by restaurants, particularly on larger value transactions.
“But if the cost gets to 0.5 per cent or higher, I think many businesses would start questioning whether they can continue absorbing it,” he said.
For businesses handling much larger payments, experts said the question is not just how much to charge, but whether UPI fees should be percentage-based at all.
Harsh Bhudolia, co-founder of Takkada, a payments platform for distributors and wholesalers, said the technology costs for processing a 50,000-rupee UPI payment is broadly the same as a 500-rupee one, but a percentage-based fee would be 100 times higher.
