March 4, 2024, New Delhi: The United Payments Interface (UPI) transaction value reached INR 18.28 lakh crore in February 2024 with transactions per day increasing from 39.3 crore in January to 41.7 crore last month. This is despite the curbs put by RBI on Paytm, one of the top 3 platforms in the country for UPI transactions.

The Financial technology (fintech) companies last week raised the contentious issue of implementing a merchant discount rate (MDR) for Unified Payments Interface (UPI) transactions during an open house session with Finance Minister Nirmala Sitharaman. The MDR on UPI payments has been a longstanding demand from the fintech industry, asserting they don’t generate revenue from such transactions. MDR is the rate charged to a merchant for payment processing services on various payment instruments.

In August 2022, the Reserve Bank of India (RBI) released a discussion paper proposing a tiered structure charge on UPI payments based on different amount bands. Following the RBI discussion paper, the finance ministry clarified that there was no proposal to levy charges on UPI transactions. However, consumers from across India have been reporting some platforms charging a convenience or transaction fee for UPI payments. One of the most common example cited by consumers frequently is the INR 20 convenience fee levied by IRCTC for UPI payments. Several other payment gateways have also been reported to be charging a transaction fee for UPI transactions from merchants, some of who end up passing the same to the consumer.

Given the various consumer complaints related to platforms and merchants charging a transaction fee for UPI, LocalCircles conducted a survey to understand consumer experiences and views on the subject. The survey received over 34,000 responses from citizens located in over 364 districts of the country. 67% respondents were men while 33% respondents were women. 43% respondents were from tier 1, 33% from tier 2 and 24% respondents were from tier 3, 4 and rural districts.

Only 23% UPI users surveyed willing to bear a transaction fee on payments; 73% say they will stop using UPI if transaction fee is charged

On the sensitive issue of transaction fee, the survey asked UPI users “If charges were to be introduced on UPI transactions, what format should be used”. The query received 11,921 responses with 73% indicating that they are opposed to any transaction fee being levied by UPI and stated that they “will stop using if a charge is introduced”. However, 12% of respondents seem to be open to paying a “fixed fee per transaction”; 5% are fine with paying a “percentage of the transaction value”, while another 6% preferred a “fixed fee up to a certain threshold and a percentage of transaction value above that”. The national survey showed that 4% of respondents were undecided on the issue that holds ramification for people who frequently use UPI for most payments including personal and professional transactions. To sum up, only 23% of UPI users surveyed are willing to bear a transaction fee on payment; 73% of those surveyed indicated that they will stop using UPI if a transaction fee is introduced.

1 in 2 UPI users surveyed confirm conducting over 10 transactions a month

To gauge how frequently UPI is being used, the survey next asked UPI users, “How many UPI payment transactions are you doing on an average each month?” The survey revealed 23% of respondents did 11-20 transactions, while 22% did between one to five transactions and another 16% depended on UPI for 6-10 transactions. Of the remaining 13% did more than 50 transactions every month, 5% around 31-50 transactions and 8% between 21-30 transactions on an average every month. In all, 87% of the 10,692 UPI users responding confirmed utilizing UPI platforms to carry out transactions each month, out of which 1 in 2 UPI users are conducting over 10 transactions every month.

37% of UPI users surveyed claim that they have experienced a transaction fee being levied on their UPI payment once or more in the last 12 months.

Following up on some of the complaints voiced by UPI users, the survey next asked UPI users, “How often have you experienced that a transaction fee was levied on your UPI transaction in the last 12 months?” The query received 11,731 responses with 16% of respondents indicating “10 times or more”; 5% of respondents indicated “6-9 times”; 16% indicated “once or twice”. However, 42% of those surveyed indicated “never” and 21% of respondents were not sure and opted for “can’t say”. The data shows 37% of UPI users surveyed claim that they have experienced a transaction fee being levied on their UPI payment once or more in the last 12 months.

In summary, an increasing number of citizens are taking to UPI to make consumer to consumer and consumer to merchant payments. Whether it is paying the vegetable vendor or paying a hotel bill, Indians are scanning the UPI QR code and making their payments. The survey finds that one of the key reasons majority have taken to UPI is because of the zero transaction fee and if a fee were to be introduced, many will reduce usage of UPI or stop using it depending on the fee. The survey also finds that some platforms or merchants are levying a convenience or transaction fee for UPI transactions with 37% UPI users surveyed saying that they have had one or more such instance in the last 12 months.

LocalCircles will escalate the findings of this study to Ministry of Finance and the RBI so that they are aware of the consumer experience and view on the subject and can drive the necessary intervention, so UPI continues to be the primary platform for digital payments in India.

70% users say will stop using UPI if fees leviedMar 05, 2024According to a survey by Local Circles, 7 out of 10 UPI users would stop using the app if transaction fees were imposed. Fintech companies have urged finance minister Nirmala Sitharaman to address the issue of implementing a merchant discount rate (MDR) in UPI transactions.https://economictimes.indiatimes.com/industry/banking/finance/70-users-say-will-stop-using-upi-if-fees-levied/articleshow/108215029.cms?from=mdrarticleET

Majority of Users to Stop Using UPI if it Attracts Transaction Fee, Says Survey - News18Mar 04, 2024Following the RBI discussion paper, the finance ministry clarified that there was no proposal to levy charges on UPI transactionshttps://www.news18.com/business/majority-of-users-to-stop-using-upi-if-it-attracts-transaction-fee-says-survey-8802470.htmlarticleNews18

73 Percent Users Will Stop Using UPI If Transaction Fee Is Charged: Survey - Forbes IndiaMar 04, 2024The survey was conducted by LocalCircles among 34,000 citizens located in over 364 districts in India, half of whom confirmed making more than 10 UPI transactions a monthhttps://www.forbesindia.com/article/news/73-percent-users-will-stop-using-upi-if-transaction-fee-is-charged-survey/91825/1articleForbes

This may lead to over 70% users stop using UPI, claims survey | - Times of IndiaMar 04, 202475% of UPI users won\'t make payments if a transaction fee is charged. 37% have experienced a fee. RBI proposed charges, but finance ministry clarifiedhttps://timesofindia.indiatimes.com/gadgets-news/this-may-lead-to-over-70-users-stop-using-upi-claims-survey/articleshow/108203774.cmsarticleTOI

Some merchants levying fee on UPI payments, finds surveyMar 04, 2024LocalCircles also said that the survey, which received over 34,000 responses from citizens in over 364 districts, found that a majority of people would stop using the real-time payment system if a transaction fee is levied.https://www.cnbctv18.com/personal-finance/upi-transaction-fee-users-to-stop-using-digital-payments-survey-localcircles-19188481.htmarticleCNBC

73% users will stop using UPI if…: What new survey revealsMar 04, 2024UPI survey: The survey polled over 34,000 respondents in over 364 districts which included 67% of male respondents and 33% of women.https://www.hindustantimes.com/business/73-users-will-stop-using-upi-if-what-new-survey-reveals-101709541303421.htmlarticleHT

73% will stop using UPI if transaction fee is charged, reveals surveyMar 04, 2024Some platforms or merchants are levying a convenience or transaction fee for UPI transactionshttps://www.business-standard.com/finance/personal-finance/73-will-stop-using-upi-if-transaction-fee-is-charged-reveals-survey-124030400202_1.htmlarticleBS

‘Majority of people will stop using UPI if…\', survey revealsMar 04, 202473% of those surveyed indicated that they will stop using UPI if a transaction fee is introduced while 23% of the respondents said that they are willing to bear a transaction fee on payment.https://www.livemint.com/news/india/majority-of-people-will-stop-using-upi-if-survey-reveals/11709531161470.htmlarticleLiveMint

Majority of users may stop using UPI if transaction fee is charged: SurveyMar 03, 2024The survey said that one of the key reasons the majority have adopted UPI is because of the zero transaction fee, and if a fee were to be introduced, many would reduce usage of UPI or stop using it depending on the fee.https://www.businesstoday.in/industry/banks/story/majority-of-users-may-stop-using-upi-if-transaction-fee-is-charged-survey-419861-2024-03-03?utm_source=btweb_story_sharearticleBT

Majority of users to stop using UPI if it attracts transaction fee: SurveyMar 03, 2024LocalCircles on Sunday said the survey received over 34,000 responses from citizens in over 364 districts, comprising 67 per cent of male respondents and 33 per cent of women.https://indianexpress.com/article/business/majority-users-using-upi-transaction-fee-survey-9193819/articleIE