India delays digital payments fee rollout amid retailer pushback

UPI was not always free for merchants, however. Banks and payment providers previously charged merchants for transactions, but the Indian government scrapped those fees in January 2020 as it sought to encourage more people to shift away from using cash, long the dominant way people have paid for goods and services in the country. UPI has continued to grow in both transaction volume and value.

In recent years, the government has sought to take UPI overseas. In April 2020, NPCI set up its international arm, and the network is currently available in several countries, including Singapore, the United Arab Emirates, and France.

NPCI had sought to limit the impact of the new merchant fee by exempting payments of ₹2,000 or less, as well as small merchants that receive less than ₹100,000 (about $1,033) a month through UPI. It also capped the fee at ₹300 (around $3) for larger transactions. The organization said it would share the money collected among participants in the UPI ecosystem to help pay for infrastructure, cybersecurity and fraud prevention.

Citing industry estimates, NPCI said last month that the annual cost of running UPI was about ₹200 billion (around $2.1 billion), including spending on server capacity, fraud prevention, and technical support. Banks and payment companies have for years argued that they need a way to recoup those costs as transaction volumes grow.