The incentive system included in the cashback scheme for shopkeepers and customers was originally planned by the government to be extended till March 2019
The central government has decided to withdraw a scheme under which merchants will no longer be given incentives of up to Rs 1000 for accepting payments through the Unified Payments Interface (UPI). Furthermore, another scheme that offered cashback of up to Rs 500 to customers for paying through UPI has also been discontinued and instead been replaced with rewards of up to Rs 150 but only to Bharat Interface for Money (BHIM) app users. BHIM has been developed by the National Payments Corporation of India (NPCI) based on UPI.
Reason of the decision is unknown but falling BHIM users might be one
The incentives have been the key behind UPI’s recent success. In June 2018 itself, UPI transactions were Rs 24.6 crore, which was 30 per cent more than May 2018 that recorded Rs 19 crore transactions alone. In fact, total UPI transactions in this year until June 2018 has been Rs 40,834 crore – a nearly 22 per cent increase, from the overall transactions until May 2018 that stood at Rs 33,289 crore.
However, with private payment apps such as Payment, Google Tez and PhonePe still being user favourites, BHIM recorded poor transaction rates. These three apps accounted for almost 80 per cent of the UPI transactions with Paytm, Google Tez and PhonePe bringing 38 per cent, 22 per cent and 19 per cent, respectively. However, BHIM had slipped to the fourth place by bringing only 7 per cent UPI transactions.
Cashback scheme was originally supposed to extend till March 2019
Earlier in April 2018, NPCI had declared that the government is all set to extend the UPI cashback scheme till March 2019. Under this scheme, customers will get a reward of Rs 25 each time for a total of 20 UPI transactions of a minimum value of Rs 100. This condition was just one among many such conditions included in the cashback scheme.
However, only on July 3, 3018, NPCI came out with a new plan effective July 1, 2018, under which only BHIM app users could get the rewards. This meant that it was mandatory for users to generate a UPI-ID and unlike before, using bank apps to make UPI transactions were not eligible for rewards.