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Payments Regulation in Asia
when calculating the caps, if a consumer uses a UPI app to transfer funds to another consumer, that volume will be considered as part of the transaction volume of the payer’s TPAP not the recipient’s TPAP. The standard also outlined certain market share thresholds during which TPAPs are notified and/or are required to act: • Level 1 – when the TPAP reaches a market share of between 25%-27%, it will receive an alert via email or letter. • Level 2 – When a TPAP reaches a market share of between 27.1% - 30%, the second alert will be sent to the TPAP and the TPAP must provide evidence of actions taken to comply with the cap. • Level 3 – The TPAP and PSP Bank must stop the on-boarding of new customers and provide undertakings to comply with the caps. The NPCI may offer an exemption to the on- boarding ban to ensure smooth user on-boarding implementation. This exemption can last up to a period of 6 months and considered on a case-by-case basis. During the exemption period, the TPAP must adopt new customer on-boarding in a moderated manner which is defined as allowing up to 50% of the total customer on-boarding requests of the preceding 3 months. From a view of financial inclusion, the growth of digital wallets in India, fueled by the accessibility and interoperability of UPI, has served to promote financial inclusion, convenience, and speed to transacting. In particular, one of the benefits for consumers of UPI-enabled digital wallets is the convenience of performing payments using only their mobile phones, allowing the 11% of the unbanked Indian population to perform digital transactions. 121 The launch of Aadhaar digital IDs, launched in 2012 and currently boasting 90% penetration of India’s population 122 , coupled with the accessibility of digital wallets using UPI, has allowed previously unbanked consumers to now register for a variety of digital wallets which allow them to make digital transactions. For merchants, the UPI system has proven to be an opportunity to reach new customers and lower costs of acceptance. Upon launch, UPI operated under a zero MDR regime. According to NPCI, the low cost of acceptance was one of the “primary reasons why the penetration of credit cards or other digital payment methods is low in India.” 123 In fact, for the FY 2021-2022, the Government of India had budgeted ~₹1,500 crore toward the reimbursement of charges for RuPay, India’s domestic debit network, and UPI. Similar financial support was also announced for FY 2022-2023. 124 This subsidy has endured since 2017, when the government announced reimbursements to banks for all debit card, UPI, and Aadhaar Pay transactions up to ₹2,000/- during 2018 and 2019 in order to ensure merchants are not charged for accepting small value payments.
121
https://www.ebanx.com/en/resources/payments-explained/unified-payments-interface-upi/
122 https://www.forbes.com/sites/tylerroush/2023/11/02/what-is-aadhaar-indias-id-system-sam-altman-is-reportedly-mod- eling-his-eye-scanning-crypto-project-worldcoin-after/?sh=6a14a3932dad 123 https://www.npci.org.in/PDF/npci/media-coverage/August-2022-The-Economic-Times-Can-UPI-Win-The-Credit-Card- Game.pdf 124 https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=21082
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