The dilemma of digital payments
Over the years, a significant part of India’s population has inclined towards digital payments entirely. Digital payments are favoured as they allow us to opt for smart and hassle-free payments in no time. Now, this is certainly helpful for people who use UPI and other methods of digital payments. But what if all these come at a price? Are we, the consumers, ready to pay for our cashless transactions? Is this the new future of digital payments in India?
RBI has recently laid the ground for a fresh debate on whether digital payments should remain free or be paid for. In this ET Play podcast titled ‘ Digital Divide: Who Should Pay for Payments ‘, host Anupriya is in conversation with Amrish Rau, CEO at Pine Labs; Rajnish Kumar, Chairman BharatPe; Akhil Handa, Chief Digital Officer at Bank of Baroda and Saloni Shukla, Deputy Banking Editor at The Economic Times.
Should digital payments remain free of charge?
RBI has insisted all the major stakeholders to share their opinions. Among them are the Fintech firms that have helped spread the UPI model throughout the country. Pine Labs, a Fintech firm, is clear about its stand. It aspires to boost the growth of UPI in India as well as to globalise UPI. Now, funding plays a huge part in this potential globalisation. They believe that Indian consumers can be a potential source of funds once RBI starts charging for every UPI transaction. So, to boost the growth of UPI, RBI needs a solid monetisation module that would empower the Fintech industry in the coming thestarsfact years.
How is the banking sector reacting to RBI’s proposal?
There is a mixed feeling about monetising digital payments in India. Some believe that digital payments signify only 5% of their entire business, while others are appreciating RBI’s call to charge customers for UPI payments.
As the panellists were speaking, it came up that the number of UPI transactions is about 20 crore per day in India.
It is evident that even one rupee charge per transaction would generate a revenue of 7000 crores annually. If 18% of it goes to the government in the form of GST that leaves about 6000 crores. So this is a very simplistic solution, it doesn’t hurt consumers because the amount of charge is minimal. On average if a consumer is charged 5 to 6 rupees for the entire UPI transactions per month, it can create a win-win situation for the government as well as the consumers and fintech.
The government is not up for monetising UPI payments:
With the government turning down RBI’s proposal of monetising digital payments, fintech companies are finding it difficult to plan the road ahead. Innovation needs a commercial model to serve a huge ecosystem. Fintech industries feel like they have run on dry pipes for a long time now.
A clear monetisation module is needed to keep India’s digital payment afloat in the coming years. If it is not going to be the consumer and the merchant, then somebody else needs to pay. It can be either the banks or the government itself. However, beyond a point, the ability of the banks to provide for these huge payments will be challenged. So, we need to find sustainable resources for keeping India brawny with digital payments.
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