How does Google Pay generate revenue given that UPI is a free service?


The free transactions offered by United Payments Interface, or UPI, systems are a major factor in why digital payment use has advanced in India. The UPI system allows users to send money to any bank account or pay bills through a single app without any hassle. However, in its discussion paper dated August 17, the Reserve Bank of India requested feedback from stakeholders on the notion of implementing a charge for the system, if transactions surpassing a specified amount may be invoiced. Furthermore, the ministry declared in a tweet that "UPI is a digital public benefit with enormous convenience for the public and productivity gains for the economy." and that it will remain a free service, and the government is not thinking about charging for UPI services. 

Thus, the topic of how UPI service providers such as Google Pay, Paytm, and PhonePe generate revenue is raised. In the absence of revenue from charges on transactions, UPI service providers have additional ways to monetize the lack of revenue from transaction fees. With the emphasis on partnerships, localisation, and an ecosystem approach as top priorities, Google Pay creates several potential for several revenue-generating opportunities. The payments platform receives a fee from the service provider each time a consumer uses UPI to pay their power or water bill or recharge their DTH. A comparable commission is received for cell phone recharges. On the other hand, companies have millions of active users and have access to a wealth of data that they can utilise to improve their products. This data partially replaces revenues. Last but not the least, the Indian government has allocated Rs 1,300 crore for a compensation program for low-value UPI transactions. According to the plan, the government would pay the acquiring bank or the merchant's bank, which receives the money, for Person-to-Merchant (P2M) transactions instead of the merchant.

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