Will you pay for using UPI? Survey reveals 73% users ready to abandon digital payments for transaction fee | Mint

Despite the recent United Payments Interface (UPI) outage that triggered around 2750 complaints, digital payments continue to be the life for many – be it householders or street vendors. In 2024, India recorded 208.5 billion digital payment transactions, of which the volume of UPI transactions was 17,221 crores.

But when asked if people were still willing to use UPI if a transaction fee was levied by the government, majority of them said no.

73% users will stop using UPI

According to a report by Local Circles, 73 per cent of the Unified Payments Interface (UPI) users will stop using the payment mode once the transaction fee has been implemented.

Interestingly, 40 per cent of the survey respondents further stated that they have been charged a transaction fee on one or more of their transactions in the last 12 months.

UPI transaction fee

UPI transactions are free for most users, especially those involving direct bank transfers. However, a 1.1 per cent interchange fee may apply to transactions over ₹2,000 made through Prepaid Payment Instruments (PPIs) like digital wallets. This fee is paid by the merchant, not the customer.

Who pays UPI transaction fee?

If a merchant accepts a payment above ₹2,000 through a Prepaid Payment Instrument (PPI) like a digital wallet, the merchant’s bank (the acquiring bank) pays the interchange fee to the customer’s bank (the issuing bank).

Payments through PPI (Prepaid Payment Instruments) occur when a transaction is made using a wallet, such as PhonePe, by scanning a UPI QR code. Other examples of wallets include Paytm wallet, SODEXO vouchers, Amazon Pay, and Freecharge wallet.

Thus, when a customer makes a payment through UPI using a PhonePe QR code at a store, the merchant should pay the interchange fee to the payment service provider, which is PhonePe.

The discussion about UPI users having to pay a transaction fee gained traction in August 2022 when the Reserve Bank of India (RBI) released a paper suggesting a tiered fee structure for UPI transactions. However, the proposal was not pursued further, and the government decided not to impose any fees, stating that UPI is considered a ‘digital public good,’ which should remain free of charge.

Have UPI users been charged transaction fees?

Several UPI users have complained on social media about being charged transaction fees. According to Local Circle’s survey, 15 per cent out of 16,445 respondents claimed they have been charged a transaction fee 10 times or more.

Surge in UPI payments

In January 2025, India’s Unified Payments Interface (UPI) transactions rose to 16.99 billion, compared to 16.73 billion in December 2024, National Payments Corporation of India (NPCI) data revealed.

According to the Reserve Bank of India’s (RBI) payment system report, UPI’s share in the total digital payments ecosystem had even increased from 34 per cent in 2019 to 83 per cent in 2024.