We missed this earlier: The Indian government on January 11 approved a ₹2600 crore incentive scheme to promote RuPay debit cards and UPI payments, a press release from the IT Ministry stated. The scheme will give banks a certain percentage of each transaction as incentive until the end of March 2023. "Although there has been an unprecedented growth in digital payments over the past few years, there is potential for further growth. It is, therefore, important to boost the adoption of digital payments, targeting untapped markets/segments/sectors," the government stated in a notification published on January 14. Why does this matter: The government has been pushing for the adoption of digital payment methods for some years now, specifically the adoption of home-grown payment instruments UPI and RuPay. By keeping the merchant discount rate at zero for UPI, the government has managed to successfully convince merchants to prefer UPI over others forms of payment such as credit and debit cards. In fact, UPI is now the most popular digital payments method in India and it continues to grow rapidly, along with RuPay, which has lower MDR compared to Visa and Mastercard. But the government has relied heavily on incentive packages to compensate banks and achieve this. The question is, will this be sustainable in the long run? Without a viable financial model, will banks, UPI apps and other ecosystem stakeholders be incentivised to continue supporting and promoting UPI and RuPay, and how much longer can/will the government support UPI and RuPay by bankrolling…
For how much longer will the Indian government bankroll UPI and RuPay?
A ₹2600 crores incentive scheme has been approved for UPI and RuPay, but how much longer before these become financially sustainable?
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