What is the UPI Business Model?: 5 Ways In Which UPI Apps Make Money

I don’t know about you, but I have shifted to a fully digital payment system since I started using UPI. I hardly keep around 500rs cash in my wallet and confidently roam around the city knowing that as long as I have my phone, payment won’t be a problem.

UPI’s system is so simple and brilliant that countries around the world applaud the ease of payment using it.

So, who is charged if UPI does not charge me for every transaction? How do UPI apps make money?

To answer your question, here are the different ways UPI apps make money:

1. Commission Income

These firms earn money through brand partnerships and commissions on transactions. For example, they may have agreements with e-commerce brands to promote their products and receive a placement fee. Additionally, they earn commissions from service providers such as mobile recharge, bill payments, and DTH activation. They may also offer incentives to users, like scratch cards with discounts or share transfers, to encourage usage and drive transactions.

2. Subscription Revenue

Every POS device (a computerized system that helps you record and track sales for a retail or hospitality environment) installed at Kirana stores for customers to scan items and make payments, UPI Apps charge them subscription fees.

3. Quick Loan Disbursement

Some UPI mobile payment apps offer instant, merchant, and personal loans. Unlike traditional banks, these apps provide faster loan approvals, allowing them to earn upfront fees ranging from 2.5% to 3.5% of the loan amount. This revenue stream appeals to individuals and small businesses seeking immediate financial assistance.

4. Collection Services:

UPI mobile payment firms act as intermediaries for lenders, collecting loan repayments from customers on their behalf. They earn a percentage of the total amount collected between 0.5% and 1.5%. This service simplifies the loan repayment process for borrowers and generates revenue for payment firms.

5. Data Collection for Marketing Services:

This is shady, but we know it happens 24x7 in shadier ways. These firms collect user data, which can be used to develop new products or assist marketing companies in identifying market trends. They may also collaborate with banks to issue co-branded credit cards, earning upfront distribution revenue and ongoing usage charges.

UPI's remarkable success and reputation as a great payment system can be attributed to its simplicity and convenience, interoperability, security measures, cost-effectiveness, government support, and growth and innovation within its ecosystem. UPI has revolutionized digital payments in India by offering a user-friendly experience, enabling transactions between different banks and payment service providers, ensuring robust security measures, being affordable, receiving government backing, and fostering a dynamic ecosystem, UPI has revolutionized digital payments in India and has become a preferred choice for millions of users. Its impact has significantly promoted financial inclusion and driven the country's transition towards a cashless economy.

The timing of introducing this system was so right that it boosted its success rate ten folds. Silently nestling its services around demonetization and promotion of 4g services across India, Government did a stellar job in making India truly Digital. The proof is here: From a Panwala to a luxury brand store, everyone has UPI QR codes set up.

UPI is one of those recent developments shaping India’s future globally. With India making deals with countries like Singapore and France to transact freely using UPI, I feel truly proud of this service and our country.