Will UPI Become a Paid Service?

Will UPI Become a Paid Service?

The National Payments Corporation of India was formed in 2008 with the objective of integrating all payment mechanisms existing in the country and making them uniform for retail payments. However, the majority of the population was opting for cash payments as retailers encouraged this method. There was also the problem of almost half the population that had no access to any form of banking service. This also precipitated the issue of black or illegal money and corruption within the country.

By 2012, the RBI had envisioned building an authorized payment and settlement system that was safe, efficient, accessible, inclusive, and interoperable. This was done as a part of the Green Initiative and to encourage the lesser use of paper in the domestic payment market. UPI was officially launched in 2016 for public use.

An Overview of the Unified Payments Interface
The Growth of UPI and Its Features
Will UPI Become a Paid Service?

How UPI Has Changed the Indian Economy?

An Overview of the Unified Payments Interface

The CEO of Netmagic Solutions says UPI has become one of the most successful deep-tech innovations coming out of India. It works on an interoperable four-pillar push-pull model. There is a beneficiary at the front end, the payment service provider, and a beneficiary back end bank that settles the monetary transaction for the users.

As it began to gain traction and prominence in 2019, the Ministry of Finance nullified the Merchant Discount Rate (MDR) on UPI which catapulted the number of low-value transactions, making huge gains on real-time transaction volume data.

From 1st January 2019, UPI became a popular payment option for IPOs. By March 2020, the transaction limit was increased from INR 1 lakh to INR 2 lakhs, which was again increased to INR 5 lakhs in December 2021 for Retail Direct Scheme and IPO applications.

In its first monetary policy of FY 2022-2023, RBI has proposed using a UPI-based QR code for a cardless cash withdrawal facility from ATMs. ToneTag launched VoiceSE, in partnership with NSDL Payments Bank and NPCI, which will enable users to make UPI payments using voice in Hindi, Tamil, Telugu, Malayalam, Kannada and Bengali language. In 2021, the value of UPI transactions was more than INR 73 lakh crores, recording a 110% rise from INR 33.87 lakh crores in 2020.

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The Growth of UPI and Its Features

The Volume of UPI-Based Digital Payments Across India from FY17 to FY22
The Volume of UPI-Based Digital Payments Across India from FY17 to FY22

Within two years of its launch, by 16th August 2018, UPI 2.0 was launched enabling their users to link Overdraft accounts to a UPI handle. There was an added feature of the AutoPay facility for recurring payments, and users were able to pre-authorize transactions by issuing a mandate for a specific merchant. The newer version also included a feature to view and store the invoice for transactions.

By August 2021, Bank of Baroda, Paytm Payments Bank and State Bank of India were live on UPI AutoPay and registered 204,000, 186,000 and 660,000 mandates respectively. Plans were in place for NCPI to expand AutoPay to international markets and operationalize real-time payment dispute resolution covering 90% of complaints by September 2022.

RuPay credit cards were allowed to be linked with UPI from 8th June 2022.   Currently, NPCI is working on a real-time feature that will reduce the time period taken by banks to unblock funds over time-out or transaction from 24 hours to 30 seconds.

Continuing the growth of UPI and its features, the RBI Governor launched UPI 123PAY on 8th March 2022, offering 4 payment options to UPI users:

  1. App-based functionality where a mobile phone manufacturer can install a UPI app through over-the-programming that can be used for payment.
  2. Missed calls through which customers can use a dedicated merchant payment number by giving a missed call. The incoming authentication call will ask for PIN verification to complete the transaction.
  3. Interactive Voice Response (IVR) based where the payment transaction will complete using pre-defined phone numbers.
  4. Payment in offline mode through sound-based proximity data communication.

On 17th November 2021, NPCI International Payments Limited signed an MoU with PPRO Financial, a UK-based financial services firm, to expand the acceptance of UPI into foreign markets, specifically in China and the US, which accounts for half of all transactions from India.

Onboarding of NRI/NRE Accounts

Earlier this month, the National Payments Corporation of India (NPCI) released a notice stating that Non-resident accounts like NRI/NRE accounts attached to international mobile numbers will be permitted to transact with UPI.  To begin with, mobile numbers of ten countries will be enabled.  These countries are Singapore, Australia, Canada, Hongkong, Oman, Qatar, United States of America, Saudi Arabia, United Arab Emirates and United Kingdom.

The NPCI, in its notice, has clarified that these accounts will be permitted to transact as long as the member banks ensure strict adherence to FEMA (Foreign Exchange Management Act) regulations and the guidelines issued by the RBI (Reserve Bank of India).  All the UPI members including banks and payment platforms have been instructed by the NPCI to ensure that they are completely compliant to all the legalities by April 30, 2023.

Lauding this move, Rajsri Regan, Head of Development – Banking and Payments, India & Philippines, FIS said – “NPCI has been working to expand and boost the use of UPI across the world and this move will widen the use of digital payments as Indians living overseas will also be able to make instant transactions.”  This facility will soon be extended to mobile numbers of other countries as well.

Will UPI Become a Paid Service?

The Ministry of Finance's Tweet About UPI Services
The Ministry of Finance's Tweet About UPI Services

The government had made transactions over UPI free of cost to encourage faster and deeper penetration of digital payments post demonetisation and especially, the pandemic. This is the government’s zero MDR (Merchant Discount Rate) framework in which neither the customers nor the merchants pay for utilizing UPI services.

However, in a discussion paper that RBI released in early August 2022, it said that as a fund transfer system bears a resemblance to the IMPS (Immediate Payment Service), the charges in UPI need to be similar to the charges that are applicable in IMPS for fund transfer transactions.

Furthermore, UPI service providers like PhonePe, Google Pay and Paytm Payments Bank have not earned any revenue for the last couple of years for their services. Industry executives are debating that with the setup and adoption of a robust digital payment infrastructure the time has come for them to earn revenue from these transactions so that more players are enticed to enter the UPI service space to build further financial inclusion.

The Finance Ministry has stepped in very recently and has tweeted -  “UPI is a digital public good with immense convenience for the public and productivity gains for the economy. There is no consideration in Govt to levy any charges for UPI services. The concerns of the service providers for cost recovery have to be met through other means.”

UPI payment platforms like Google Pay and Paytm have amassed millions of active users and have a deep data mine to access to fine-tune their products. Also, they have other avenues for revenue building. The payment platforms earn a commission from the service provider whenever there is a bill payment for utilities like electricity and water as well as mobile recharges and DTH recharge payments. To these payment platforms data substitutes for revenue to a certain extent.

In the immediate future, it remains unlikely that UPI will become a paid service.


The penetration and adoption of UPI continues to grow as the service itself seeks to grow and expand to include more and more features. While the future is bright for the UPI platform, it will be a wait-and-watch game to see whether the service in the future might attract charges or not.


What is UPI?

UPI stands for Unified Payments System. It is a system developed by the National Payments Corporation of India that supports multiple bank accounts in a single mobile application. It facilitates inter-bank, peer-to-peer, and person-to-merchant transactions.

Will UPI become a paid service?

There has been suspicion among the people that there may be the possibility of UPI transactions carrying a service charge. However, to clear people's suspicion, the Finance Ministry recently made a tweet saying that there is no consideration in Govt to levy any charges for UPI services.

Some of the most popular UPI apps are:

  • Google Pay
  • BHIM
  • Paytm
  • PhonePe
  • Amazon Pay

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