To facilitate a robust digital payment ecosystem across the country, the Union Cabinet on Wednesday approved an incentive scheme worth Rs 2,600 to promote RuPay debit cards and low-value BHIM-UPI transactions (person-to-merchant) for a year starting April 2022.
In a statement on January 11, 2023, the cabinet notified that under the scheme, “acquiring banks will be provided financial incentive, for promoting Point-of-Sale (PoS) and e-commerce transactions using RuPay Debit Cards and low-value BHIM-UPI transactions (P2M) for the financial year FY2022-23.”
Earlier in her budget speech for the financial year 2022-2023, Union Finance Minister Nirmala Sitharaman announced the government’s intent to continue supporting digital payments to promote payment platforms that are economical and user-friendly. “The scheme has been formulated in compliance with the aforesaid Budget announcement,” the statement reads.
“In FY2021-22, the government approved an incentive scheme in compliance with the budget announcement of FY2021-22 to give a boost to digital transactions. As a result, total digital payments transactions have registered a year-on-year growth of 59%, rising from 5,554 crore in FY2020-21 to 8,840 crore in FY2021-22,” it said.
BHIM-UPI transactions have registered a year-on-year growth of 106 per cent, rising from Rs 2,233 crore in FY2020-21 to Rs 4,597 crore in FY2021-22, although stakeholders in the digital payments systems and the Reserve Bank of India (RBI) had expressed concerns regarding potential adverse impact of the zero MDR regime on the growth of the digital payments ecosystem, the statement said.
Additionally, the National Payments Corporation of India (NPCI) has reportedly requested, among other things, for incentivisation of BHIM-UPI and RuPay Debit Card transactions to create a cost-effective value proposition for ecosystem stakeholders and increase merchant acceptance footprints and faster migration from cash payments to digital payments.
The incentive scheme will facilitate building a robust digital payment ecosystem while promoting RuPay Debit Card and BHIM-UPI digital transactions “in-line with the objective of ‘Sabka Saath, Sabka Vikas’, the scheme will also promote UPI Lite and UPI 123PAY as economical and user-friendly digital payments solutions and enable further deepening of digital payments in the country, across all sectors and segments of the population,” the statement said.
Anand Kumar Bajaj, founder MD and CEO of PayNearby explains, the doubling of this incentive, vis-à-vis the last financial year, is yet another step in forging a cash-light economy, noting that the latest move “will further help build a robust digital payment ecosystem and establish UPI Lite and UPI 123 Pay as cost-effective, easy-to-use, and the preferred mode of payment for all at the last mile. In addition, it will
help augment the merchant acceptance points, thus making the switch from cash to digital payments fast and easy."
Additionally, Swapnil Jambhale, co-founder of SafexPay said that while most of these payment participants, especially the banks, are already operating on thin revenue margins, “with this scheme, they will be compensated for all the transactions processed over the last few months. This will encourage banks that process transactions on behalf of the merchants to further plan investment and expansion in these payment networks.
“This will have a direct impact in bringing deprived segments of the economy, such as MSMEs (micro, small and medium enterprises), unorganised sector, and farmers who have access to RuPay debit cards and UPI, within the ambit of digital payments.” The scheme is likely to accelerate the pace of financial inclusion in the country, Jambhale added.