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Payments Regulation in Asia
INDIA: • Payments Mix: Previously a cash-dominant economy, India’s economy has undergone rapid shifts in its payments mix as the result of the government’s launch of Unified Payments Interface (UPI), an interbank solution that facilitates payments. Between 2017 and 2022, digital wallets, powered by UPI’s infrastructure, nearly doubled in share of online spending from 26% to 50%. As of 2022, digital wallets were also the most popular payment method for POS transactions, representing 35% of spending. Most notably, cash’s share of POS spending plummeted alongside the growth of UPI’s rise, with cash representing just 27% of spending, down 45 percentage points from 2017. • Public Resources for Cost Analysis: The Reserve Bank of India (RBI) publishes monthly reporting of transaction statistics of various payment methods by channel since 2021. While Merchant Discount Rates for debit were capped for POS and QR-based transactions in 2018, and National Payment Corporation of India (NPCI) introduced interchange rates for UPI transactions in 2023, neither average interchange nor MDR by payment method are published regularly by the RBI. • Price Trends: While the RBI does not publish regular interchange statistics on average cost, the RBI has capped debit card interchange fees for a number of transaction types. 44 In 2018, the RBA capped POS and QR-based debit transactions between 0.3-0.9% of transactions for both card present and card not present transactions, with varying rates for small businesses. In addition, India’s UPI, which previously operated at zero cost and featured subsidies from the RBI to payments players for facilitating acceptance, saw interchange fees introduced by operator NPCI in 2023. The fees range from 0.5-1.1% but do not cover all transaction types, meaning some transactions will still operate cost- free. 45
44 There are two merchant categories to which debit interchange caps apply: small merchants (turnover up to 20 lakh) and other merchants (turnover above 20lakh). For physical PoS infrastructure (including online card transactions) the MDR must not exceed 0.4% for small merchants and 0.9% for other merchants. These rates are capped at ₹ 200 and ₹ 1000 per transaction, respectively. For QR code-based card acceptance structure, the MDR must not exceed 0.3% for small merchants and 0.8% for other merchants. These rates are also capped at ₹ 200 and ₹ 1000 per transaction, respectively. 45 By April 2023, NPCI had in fact announced that UPI transactions would attract a series of interchange fees depending on the industry. The fees for UPI-based PPI transactions are characterized below:
• 1.1% interchange fee for high-ticket (Rs 2,000) • 0.5% interchange fee for fuel transactions • 0.7% interchange fee for telecom, utilities, post office, education, and agriculture transactions • 0.9% interchange fee for supermarket • 1% interchange fee for mutual fund, government, insurance, and railways
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