These are the likely changes in digital payments as indicated by the RBI governor

• India’s central bank will be releasing a paper on digital payment charges soon.
• RBI is also planning to introduce UPI-based payment products to India’s feature phone users.
• Currently, no UPI player in India makes money out of it.

The Reserve Bank of India (RBI) will release a discussion paper on charges on digital payments in India, Governor Shaktikanta Das revealed as part of the monetary policy announcement on December 8.

In order to further boost financial inclusion, RBI will also be introducing a unified payments interface (UPI)-based payment products for feature phones. Notably, UPI is currently the most popular digital payments method in India. Nearly 4.1 billion transactions worth ₹6.68 lakh crore were carried out by UPI in November 2021.

RBI will also enhance the transactions limited to ₹5 lakh for UPI payments for RBI's Retail Direct scheme. The previous limit was ₹2 lakh. Das believes that it will help deepen the UPI payment segment and ease the transactions even further.

RBI will release a discussion paper on various charges in the payment system which includes cards, wallets and UPI, Das said.

One of the long-standing demands of the UPI players in India is the imposition of merchant discount rate (MDR) on these transactions, which will allow the facilitators to make money on it.

Currently, any digital payments player — including Paytm, Google Pay and PhonePe — makes no money on UPI-based payments as they are not allowed to charge any commission on it. Although the same players can charge on other non-UPI digital transactions.

PhonePe’s Founder and Chief Executive Sameer Nigam, in a press conference held on September 8, had highlighted that currently 85-90% of the firm’s transactions are carried out using UPI that has "zero MDR". PhonePe currently processes over 45% of UPI transactions in India on a monthly basis and is the biggest player in this domain.

However, it is still not sure if RBI would take due notice of this matter.

Ankit Bhatnagar, Head of Product at Mswipe, said, “At Mswipe, we witnessed this trend too with our merchants seeing an uptick in UPI transactions. Mswipe merchants clocked transactions worth INR 810 crore in September 2021, a significant increase over the year from INR 132 crore in October 2020. RBI’s proposal of introducing UPI-based payment products for feature phones will further boost the acceptance of digital payments and also boost financial inclusion. This will not only benefit users in terms of flexibility and convenience but also ensure to bring more small merchants into the digital economy while also strengthening the payments infrastructure of the country."

"Additionally, RBI’s decision on forming a panel to study digital payments charges will mitigate the concerns of customers over the reasonability of various charges incurred by them and will bring in more transparency and regulation in the system as a whole,” he added.

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