India considers delaying UPI payment fee rollout

India is contemplating a postponement of the implementation of a charge on substantial payments through its widely-used Unified Payments Interface (UPI) platform by several months, according to a regulatory official and an industry executive privy to the deliberations. The charge, which was introduced last month following the cessation of zero-cost payments, imposes a 0.4 percent fee on merchants for transactions surpassing 2,000 rupees (approximately USD21).

This move, however, has faced resistance from retailers and major brokerages. UPI is utilized by more than 500 million individuals in India's third-largest economy to conduct a diverse range of transactions, from purchasing tea from roadside stalls to buying iPhones. Walmart’s PhonePe and Alphabet’s GooglePay hold about 80 percent market share in UPI transactions by value in August.

The fee was scheduled to commence on October 15, coinciding with India's annual festive season spanning from October to December, a period characterized by heightened consumer spending. The final decision on delaying the rollout remains pending with the National Payments Corporation of India (NPCI) but is anticipated in the coming days, as per one of the sources.

A delay in the implementation would afford payment firms ample time to refine their systems and avoid transferring costs to consumers, while simultaneously addressing potential challenges retailers may encounter during the festive period, the sources disclosed, maintaining anonymity due to the private nature of the discussions. The fee might be enforced from January, as per the industry executive.

An email to the NPCI went unanswered. Moneycontrol was the first to report the potential delay. Indian digital payments firms' stocks experienced a decline on Thursday, as these companies stand to gain from the imposed charge. Paytm and Mobikwik witnessed a drop of 5.5 percent and 7 percent, respectively, while Pine Labs saw a decrease of 3 percent.