Authoritative sources told Reuters that the Indian payments body held consultations with creditors and payment companies on Tuesday to discuss introducing charges for large transactions in the world's largest retail fast payment system.
These consultations followed India's change in payment legislation on Monday, which allowed firms to charge for transactions exceeding ₹2000 (approximately 20 US dollars). Previously, all payments made through the Unified Payments Interface were free.
This change will benefit banks and payment firms in Asia's third-largest economy, which registered 24 billion UPI payments totaling $311 billion in August.
Meeting Agenda
According to two sources who participated in the meeting, the agenda for Tuesday includes determining the general fees that will be charged to payments to merchants, as well as distributing these funds among banks, payment applications, and aggregators.
A third source reported that regulators, including the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI), are leaning towards a commission rate of 0.4%, although the final rate and distribution scheme have not yet been determined.
Meanwhile, the second source noted that banks could receive 40% of the collected fees, with the remaining amount being split equally between the payment application and the payment service provider for merchants.
Sources clarified that while transactions from individuals to merchants are planned to be monetized, peer-to-peer payments will remain free.
All sources requested anonymity as they are not authorized to speak to the media. NPCI and RBI did not immediately respond to email requests for comment.
Approaching Fee Implementation
The introduction of fees on UPI could benefit companies such as Paytm and Pine Labs, opening up an additional revenue stream for banks and improving prospects for PhonePe and Razorpay, which are preparing for IPOs.
Analysts at Jefferies predict that these commissions could generate between 50,000 and 100,000 crore rupees annually for the payments industry.
India's payment landscape is dominated by apps that have received significant foreign investment, such as PhonePe, backed by Walmart, Google Pay from Alphabet, Paytm, and CRED, backed by Meta.