The cost of free: UPI's exponential growth strains limits of subsidies

Industry players add that while other monetisation-friendly avenues are emerging for UPI, those require to be developed further to offset the impact of free transactions

India’s most successful digital payments story — the Unified Payments Interface (UPI) — is free for consumers but far from costless. As Reserve Bank of India (RBI) Governor Sanjay Malhotra recently reminded, someone is footing the bill, and for now, it is the government.

 

That raises a pressing question: how long can subsidies sustain UPI’s explosive growth? The government wants transaction volumes to expand tenfold, but industry participants, including fintechs and banks, say the UPI ecosystem may be nearing a tipping point where technology and operational costs are difficult to absorb.  

Several executives argue that UPI still has the potential