With UPI payments booming and the zero-merchant discount rate (MDR) regime expected to continue, banks and payment companies are hoping for greater fiscal support from the government in the upcoming Union Budget to help expand digital payments.
According to sources, the industry is hopeful of higher allocation as subsidy for digital payments in the Union Budget 2023-24.
The Payments Council of India (PCI) has sought about Rs 8,000 crore in support for the next fiscal, including Rs 6,000 crore for UPI person to merchant (P2M) transactions and another Rs 2,000 crore for Rupay debit card as MDR support.
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“The higher support is estimated based on the current volume of payments. This is needed for the industry to help expand infrastructure for these growing transactions,” said Vishwas Patel, chairman, Payments Council of India and executive director, Infibeam Avenues.
This is a steep jump from about the Rs 1,500 crore-odd fund allocated in the previous years. The Union Budget 2021-22 had allocated Rs 1,500 crore as a financial incentive to promote digital modes of payment and finance minister Nirmala Sitharaman had, in the Union Budget 2022-23, said the financial support previously announced would continue.
“The main competition in digital payments is in the UPI, QR payment segment. This is where the MDR charge is still being debated. A lot of fintechs and payment services are investing in building the UPI QR-based platform. The payment service is free but the payment ecosystem is leaning more towards monetisation of payment data to offer credit as well as other financial services,” said a banker, noting that both the value and volume of transactions on Unified Payments Interface (UPI) has risen steadily over the last year.
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“Industry is hopeful that the MDR will be revived or at least the subsidy for digital payments will be increased in the Budget,” the banker said, adding that the MDR would make the business model more sustainable for players.
As many as 7.83 billion transactions worth Rs 12.8 trillion took place on UPI platform in December 2022, registering an over 7% growth in both volume and value terms compared to November 2022.
