Over 70% Users To Stop Using UPI If Transaction Fee Is Levied: Survey

Most Indian users intend to stop transacting on unified payments interface (UPI) if a fee is imposed on such payments, as per a survey. 

As per the survey by LocalCircles, nearly 73% users said they are opposed to levying a transaction fee on UPI transactions and they would stop using the digital payment method if such a fee is imposed. Only 23% of UPI users surveyed are willing to bear a transaction fee on payment. 

This is more or less in line with the arguments presented by industry stakeholders that end customers do not want to pay a fee for UPI transactions.

A majority of the surveyed users noted that they use UPI because of the zero transaction fee. “If a fee were to be introduced, many will reduce usage of UPI or stop using it depending on the fee,” LocalCircles said, highlighting the findings of the survey.

The survey received over 34,000 responses from citizens located in over 364 districts of the country. 

The survey also pointed out a major concern. A third of the surveyed users claimed that some platforms or merchants are levying an additional convenience fee to process UPI transactions. As per the survey, 37% of UPI users said that they experienced a transaction fee being levied on their UPI payment once or more in the past 12 months.

The findings of the survey were released a week after fintech companies raised the issue of implementing a merchant discount rate (MDR) on UPI transactions during a discussion with finance minister Nirmala Sitharaman.

It is a long-standing demand of the fintech industry to levy MDR on UPI payments, as they don’t generate revenue from such transactions. The MDR is the rate charged to a merchant for processing payments. 

Previous attempts to even propose MDR have been met with strong resistance from the general public. In August 2022, the Reserve Bank of India (RBI) released a discussion paper which proposed levying a transaction fee on UPI payments. 

Following a public outcry, the finance ministry clarified that it was not considering any such proposal. 

Notwithstanding the troubles, UPI payments continue to rise in the country. The real-time payment system clocked 1,210 Cr transactions worth INR 18.28 Lakh Cr in February 2024.

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