Getty ImagesMumbai: India’s burgeoning digital payments industry received a budget boost from Finance Minister Nirmala Sitharaman by way of a Rs 1,500 crore fund earmarked for the growth of the sector and to “incentivise” businesses deploying solutions.
Industry chief executives and experts told ET that the newly announced fund could be the much sought-after “compensation” for the losses incurred by the industry on account of the waiver of Merchant Discount Rates (MDR) on UPI and RuPay transactions announced by the finance minister in her first budget in 2019.
Even as more details are awaited on how the fund will be operationalised, the industry expects a target-based subsidy for firms deploying acceptance infrastructure in Tier III and beyond.
“Hopefully, this (the budgetary fund) will be used to reimburse losses suffered by payment service providers for processing Rupay debit cards and UPI transactions for free in the year 2020,” said Vishwas Patel, chairman of Payment Council of India (PCI).
The move also comes months after the Reserve Bank of India announced an Infrastructure Development Fund with an initial corpus of Rs 345 crore to promote digital payments in rural India. Patel said that both the funds can work in tandem to boost payments growth in India.
To be sure, the government had first waived off MDR — or the fees accrued by the banks and payment operators from merchants — for processing digital payments from the UPI and RuPay modes of payments in 2019.
The National Payments Corporation of India (NPCI), which operates both the systems, had pegged the losses for India’s payments industry at over Rs 2000 crore when the zero MDR regime first kicked in from January of 2020.
According to Amrish Rau, the CEO of Pine Labs, that the newly-setup fund can provide a boost to merchant acquirers deploying payment terminals to help retailers in bringing customers to stores.
“I am fairly sure the earmarked fund of Rs 1,500 crore will be used to support digital transaction acquirers,” Rau said. “This will help the fintech companies to make digital payments ubiquitous across India, while also not adding pressure to retailers who are trying to get consumers back in the stores.”
India’s digital payments sector has grown “manifold” over the last few years, Sitharaman said. NPCI’s UPI channel has recorded an annual growth rate of 414% since its inception in 2016 with over 200 million active users.
On Monday, NPCI announced that the channel has recorded yet another record in monthly transactions, clocking 2.3 lakh billion transactions worth Rs 4.3 lakh crore in January 2021.
Industry chief executives and experts told ET that the newly announced fund could be the much sought-after “compensation” for the losses incurred by the industry on account of the waiver of Merchant Discount Rates (MDR) on UPI and RuPay transactions announced by the finance minister in her first budget in 2019.
According to Paytm founder Vijay Shekhar Sharma, the emphasis on digital payments in Union Budget 2021-22 signals more importantly towards a positive intent by the government and policymakers to support the growth of India’s nascent digital economy. “An increase in digital payments not only favours economic growth but also is a step towards formalisation of the economy,” Sharma told ET.
Even as more details are awaited on how the fund will be operationalised, the industry expects a target-based subsidy for firms deploying acceptance infrastructure in Tier III and beyond.
“Hopefully, this (the budgetary fund) will be used to reimburse losses suffered by payment service providers for processing Rupay debit cards and UPI transactions for free in the year 2020,” said Vishwas Patel, chairman of Payment Council of India (PCI).
The move also comes months after the Reserve Bank of India announced an Infrastructure Development Fund with an initial corpus of Rs 345 crore to promote digital payments in rural India. Patel said that both the funds can work in tandem to boost payments growth in India.
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To be sure, the government had first waived off MDR — or the fees accrued by the banks and payment operators from merchants — for processing digital payments from the UPI and RuPay modes of payments in 2019.
The National Payments Corporation of India (NPCI), which operates both the systems, had pegged the losses for India’s payments industry at over Rs 2000 crore when the zero MDR regime first kicked in from January of 2020.
According to Amrish Rau, the CEO of Pine Labs, that the newly-setup fund can provide a boost to merchant acquirers deploying payment terminals to help retailers in bringing customers to stores.
“I am fairly sure the earmarked fund of Rs 1,500 crore will be used to support digital transaction acquirers,” Rau said. “This will help the fintech companies to make digital payments ubiquitous across India, while also not adding pressure to retailers who are trying to get consumers back in the stores.”
India’s digital payments sector has grown “manifold” over the last few years, Sitharaman said. NPCI’s UPI channel has recorded an annual growth rate of 414% since its inception in 2016 with over 200 million active users.
On Monday, NPCI announced that the channel has recorded yet another record in monthly transactions, clocking 2.3 lakh billion transactions worth Rs 4.3 lakh crore in January 2021.
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