PhonePe begins charging processing fee on UPI transactions for mobile recharges

PhonePe, the digital payments arm of the Walmart group, has begun imposing processing costs of between Rs 1 and 2 per transaction for cellphone recharges of more than Rs 50, even if they are done through the Unified Payments Interface (UPI). PhonePe is the first digital payment software to charge customers for UPI-based transactions, which are currently available for free from competitors such as GooglePay and PayTM.

PhonePe, like the other players, charges a processing fee for credit card payments. According to a corporate spokeswoman, this is being done on an experimental basis with a small number of people. There is a Re 1 charge for recharges between Rs 51 and Rs 100, and a Rs 2 charge for recharges over Rs 100. Other PhonePe transactions and money transfers, on the other hand, will remain free. In monthly Unified Payment Interface (UPI) and Bharat BillPay Services (BBPS) transactions, the Walmart-owned company holds the most market share. It accounts for 45% of UPI monthly traffic and 47% of the monthly transaction value.

PhonePe starts charging a processing fee on UPI transactions for mobile recharges

“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.

"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 a convenience fee on other platforms) on payments with credit cards only," the spokesperson added.
 

PhonePe reports 165 crore+ UPI transactions on its platform in September

According to a Bernstein report released in July, PhonePe and Google Pay continue to invest in customer incentives and spend on marketing at 2.5-3.0 times revenue, while Paytm has streamlined marketing spend from 1.2 times revenue in FY 2017 to 0.4 times in FY20, and now at 0.2 times revenue (FY21), while growing merchant payments share across wallets, UPI, PoS, and online payments. The National Payments Corporation of India has set a market share cap for UPI, ensuring that no company owns more than 30% of the market. According to the article, the NPCI market share caps would force PhonePe and Google Pay to reduce their consumer incentives in order to reach the 30% cap. According to a report by PTI, digital payment has the greatest percentage of UPI transactions among third-party apps. In September, PhonePe reported more than 165 crore UPI transactions on its platform, accounting for 40% of the app market.

With inputs from PTI.

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