India’s government has introduced another new step in support of the country’s expanding digital payments market.
In a speech announcing the country’s annual budget this week, Finance Minister Nirmala Sitharaman proposed a fund of 1,500 crore Indian rupees (about US$205 million) to use as “financial incentive” to promote digital transactions, according to Livemint.
Sitharaman did not detail how the money is to be spent. However, some payment company executives hope it will be used in part to help offset the decrease in payment provider revenue that came from an earlier government policy.
A little over a year ago, the government announced that it was waiving the merchant discount rate (MDR) – a per-transaction fee paid by merchants that goes to providers and banks processing the payments – on transactions that used the country’s domestic payment methods, RuPay and UPI.
“We are hoping the funds will be used towards developing alternatives to zero merchant discount rate policy and initiatives towards bringing digital financial literacy in vernacular languages. These will instill trust in the system and accelerate adoption from MSMEs,” Harshil Mathur, CEO and co-founder of PF Razorpay, told Livemint.
The funds could also be used to help subsidize more deployment of payments acceptance infrastructure, particularly in smaller cities, according to the Economic Times.
Amrish Rau, CEO of PF Pine Labs agreed that help was needed to spread digital payments, particularly at a time when merchants have other priorities.
“I am fairly sure the earmarked fund of Rs 1,500 crore will be used to support digital transaction acquirers,” Rau told ET. “This will help the fintech companies to make digital payments ubiquitous across India, while also not adding pressure to retailers who are trying to get consumers back in the stores.”
In the budget speech, Sitharaman noted that India’s digital payments system has grown significantly over the past few years. The country’s UPI payment method, for example, has an annual growth rate of 414% following its launch in 2016, according to the ET article.