Budget Allocation For Promoting Digital Payments Almost Halves

SUMMARY

The allocation for fintech startups and banks for promoting RuPay debit cards and low-value BHIM-UPI P2M (person-to-merchant) transactions stood at INR 2,485 Cr in FY24

Moreover, funds for promoting digital payments were completely absent from the Union Budget 2024-25

Earlier this month, Amazon Pay India CEO Vikas Bansal said that “some sort” of MDR regime was essential for smaller UPI players to receive their fair share

The Centre slashed the budget allocation for incentivising digital payments in the fiscal year 2024-25 (FY25) by over 42% to INR 1,441 Cr.

The allocation for fintech startups and banks for promoting RuPay debit cards and low-value BHIM-UPI P2M (person-to-merchant) transactions stood at INR 2,485 Cr in FY24, as per the revised estimates.

This decrease is in line with the allocations made in the interim Budget in February this year.

The outlay for the ongoing fiscal is also 44.5% lower than INR 2,600 Cr worth of sops that were announced for the same purpose in FY23.

Moreover, funds for promoting digital payments were completely absent from the Union Budget 2024-25.

The reduction in the outlay comes even as industry stakeholders have time and again called for the implementation of the merchant discount rate (MDR) regime for Unified Payments Interface (UPI) transactions.

Earlier this month, Amazon Pay India CEO Vikas Bansal said that “some sort” of MDR was essential for smaller UPI players to “receive a fair share for the value they add to the payment ecosystem”.

The demands are not without reason. A recent PwC report claimed that stakeholders (including payer’s bank, beneficiary’s bank and UPI app provider, and NPCI) have to shell out 0.25% of the total transaction value for processing a UPI P2M transaction.

The report added that UPI stakeholders incurred a charge of INR 12,000 Cr for UPI P2M transactions between April 2023 and February 2024 as the payments infrastructure processed P2M payments to the tune of INR 4.5 Lakh Cr during the period.

That said, UPI continues to gather steam. The payments infrastructure processed 1,389 Cr transactions in June, down 1% month-on-month from 14.04 Bn in the previous month. The value of the transactions in June stood at INR 20.07 Lakh Cr, 1.9% lower than May’s INR 20.45 Lakh Cr.

PhonePe topped the charts with a 48.3% market share in UPI in June, followed by Google Pay and Paytm with 36.7% and 8% market share, respectively.