In order to encourage the transition away from cash, a report claims that imposing a digital facilitation fee for UPI transactions on e-commerce websites and using the resources to make UPI transactions free for businesses on all offline platforms would be beneficial.
According to the estimate, e-commerce merchants will generate Rs 5,000 crore in 2023–2024 from a 0.3% fee in the form of a digital payment facilitation fee on UPI payments. This would increase the financial viability of UPI. The National Payments Corporation of India (NPCI) moved to allow prepaid wallet transactions on the interoperable UPI rails and open the door for a 1.1% interchange for major merchants after the report’s author, IIT-Bombay professor Ashish Das, made the recommendation. According to the research, in the same way that they cover the cost of cash and central bank digital currency, the government and RBI must support offline UPI payments.
The legislation now requires that all UPI transfers between bank accounts be free. To partially offset the costs incurred by banks and payment providers, the government offers a subsidy in the Union Budget. Because they assist replace cash, which is more expensive given the printing and distribution costs, the subsidy is justifiable.
All transactions from one bank account to another are still free for businesses. In accordance with NPCI regulations, any merchant who accepts UPI must expressly agree before being permitted to receive prepaid instruments on the UPI QR.