PhonePe starts charging processing fees on phone recharges above Rs 50

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Digital payments leader PhonePe has started charging processing fees of Re 1 to Rs 2 on phone recharges over Rs 50.

This is being done on an experimental basis with a small number of users, a company spokesperson said. Recharges between Rs 51 and Rs 100 have a Re 1 charge and those above Rs 100 will be charged Rs 2.

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“We are running an experiment on our platform to a very small base where a few users are paying for recharges. Most of the base is either not being charged anything or is paying Re 1 as a part of the experiment we are running,” the spokesperson added.

However, other transactions on PhonePe and money transfers will continue to remain free of charge. “On bill payments, most players and biller websites charge a processing or convenience fee on credit cards like us, and this has been the industry norm for a while now.”

The Walmart-owned company has the highest market share in monthly Unified Payment Interface (UPI) as well as Bharat BillPay Services (BBPS) transactions. It makes up 45 percent of UPI monthly volumes and 47 percent of the monthly value of transactions.

The latest data shared by the National Payments Corporation of India (NPCI) on BBPS for August showed that PhonePe leads the market with a 49 percent volume share.

On the merchant side, UPI players are not allowed to levy any charges due to the Zero Merchant Discount Rate (MDR) policy which came into effect in January 2020. MDR refers to the charges levied to merchants for using digital payment modes. Under the policy, merchants should not be levied any charges on digital payments made through UPI, RuPay debit cards and UPI QR codes.

The policy also mandates companies with a turnover of over Rs 50 crore to make low-cost modes of payments available. The policy has led to a long-drawn debate that there seems to be no money for companies in the business of payments.

Founded in 2015 by former Flipkart executives Sameer Nigam, Rahul Chari, and Burzin Engineer, the company has over 300 million registered users. Apart from payments, the platform also offers insurance, gold purchasing, and mutual fund services.

For FY21, PhonePe reported a drop of 44 percent in losses to Rs 888 crore versus Rs 1,570 crore in FY20. The company’s revenue jumped 85 percent from Rs 372 crore in FY20 to Rs 690 crore in FY21 led by a sharp rise in transactions on the platform.