PhonePe begins charging processing fee on UPI transactions for mobile recharges

  • PhonePe is charging processing fees for payments made through credit cards
PhonePe recorded more than 165-crore UPI transactions on its platform in September which constitutes 40% share among the app segment.(Bloomberg/For Representative Purposes Only)
PhonePe recorded more than 165-crore UPI transactions on its platform in September which constitutes 40% share among the app segment.(Bloomberg/For Representative Purposes Only)
Published on Oct 22, 2021 09:26 PM IST
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Written by Shankhyaneel Sarkar | Edited by Poulomi Ghosh, Hindustan Times, New Delhi

PhonePe, Walmart group’s digital payments firm, started charging processing fees in the range of 1 and 2 per transaction for mobile recharges which are above 50 even if they are done through Unified Payments Interface (UPI), news agency PTI reported.

PhonePe is the first digital payments app which is charging users for UPI-based transactions which is being offered for free by its competitors like GooglePay and PayTM among others.

PhonePe is charging processing fees for payments made through credit cards like other players.

“On recharges, we are running a very small-scale experiment where a few users are paying for mobile recharges. Recharges below 50 are not charged, recharges between 50 and 100 are charged Re 1 and above 100 are charged 2. Essentially, as a part of the experiment, a majority of users are either not paying anything or paying Re 1,” a PhonePe spokesperson was quoted as saying by news agency PTI.

The digital payment has the largest share in terms of UPI transactions among the third-party apps, according to a report by news agency PTI. PhonePe recorded more than 165-crore UPI transactions on its platform in September which constitutes 40% share among the app segment.

“We are not the only player or payment platform charging a fee. Charging a small fee on bill payments is now a standard industry practice and is done by other biller websites and payment platforms also. We charge a processing fee (called as convenience fee on other platforms) on payments with credit cards only,” the spokesperson clarified.

Investment research firm Bernstein in a report released in July showed that PhonePe and Google Pay are among firms which continued investing in providing customer incentives and spending on marketing at 2.5-3.0 times. Another digital payment platform PayTM streamlined marketing spend from 1.2 times of revenue in FY17, to 0.4 times in FY20, and is currently 0.2 times of revenue in FY21 while growing merchant payments shares across wallets, UPI, PoS and online payments.

The National Payments Corporation of India (NPCI) also placed a cap on the market share for UPI which does not allow any player to have market share above 30%.

The Bernstein report said the NPCI market share caps will require PhonePe and Google Pay to tone down their customer incentives in order to bring share towards the 30% cap.

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Friday, December 03, 2021