Pulling the plug on one of the prime features driving the use of the Bharat Interface for Money (BHIM) app in recent months, the National Payments Corporation of India (NPCI) has told banks cashbacks for BHIM transactions will be restricted to new users. Moreover, incentives for merchants accepting unified payments interface (UPI) payments have been withdrawn altogether, effective July 1.
To avail a cashback on the BHIM app now, one needs not only to be a new user, but also make 10 unique transactions of at least Rs 50 each. After the 10th transaction, one receives Rs 150 as cashback.
In April this year, the government had launched a scheme entailing cashbacks of up to Rs 750 per month for consumers using BHIM. Merchants who accepted payments through any UPI app were entitled to a maximum cashback of Rs 1,000 per month. They were entitled to receive a cashback worth 10% of the value of each transaction, subject to a cap of Rs 50 per transaction.
In a notification dated July 17, NPCI said that following a review of the incentive scheme, the ministry for electronics and information technology has decided to scale it back significantly.
The cashback scheme for consumers had come in for criticism, with players like Mobikwik and PhonePe accusing it of being discriminatory against other UPI apps. Some commentators also said that the incentives were encouraging “misuse” of the payment mode.
The move could hit UPI usage to an extent, as the incentive scheme was clearly pushing up UPI volumes in recent months. Over the three-month period ended June 2018, monthly volumes had risen 38%; they crossed the 200-million mark for the first time to clock a total of 246.37 million in June.
The BHIM app, which has steadily lost share to rivals such as Paytm, Google Tez and PhonePe, sorely needed the incentives to shore up usage. In August 2017, the NPCI-promoted app used to account for 45% of all UPI transactions. In June 2018, its share was down to a mere 6.6%.
Payment players cite anecdotal evidence to say BHIM usage had picked up as a result of the incentive scheme. For example, more people were using it to book tickets on the Indian Railways Catering and Tourism Corporation site, which is something of a bellwether for payments behaviour in India, Harshil Mathur, CEO and co-founder, Razorpay, said.
Payment companies are taking the move in their stride, saying that the scheme was all along expected to be only a temporary booster. “There might be incentives in other forms once UPI 2.0 launches. If they offer periodic incentives of the kind Amazon and Flipkart do, that could be effective, too,” Mathur said.
Vivek Belgavi, partner and India fintech leader, PwC India, said the incentives have done their job of helping lay the railroad for digital payments. Any further push will have to be more structural in nature. “These will be areas such as inter-wallet interoperability, the full-time launch of Bharat BillPay and UPI 2.0. There are many nuclear-focused operators that have now come in and to that extent, a lot has been done,” he added.