Above the Fold: How UPI apps earn the Big Bucks?

UPIs have become a day-to-day part of our lives and it only seems they’ll become more dear to us with each passing day. Has it ever crossed your mind as to how apps generate revenue? Dive deep into the interesting sources of income for these apps.

  • Yash
  • Sat Jul 15 2023 3 mins read


    Have you ever wondered, before carelessly using UPI 20 times a day, how much money these UPI giants are actually making under the hood? Since the government came up with UPI, huge companies have targeted market share for UPI transactions through their Apps and Payment gateways. Even to this day, Companies such as Paytm, PhonePe, and Google Pay fight for customers to make payments through their apps. But how are they making money when there is no cut taken by the app? Let us dive deep into how these UPI apps make money and if they are actually profitable…

    • Subscription revenues: These apps charge a small transaction fee for each of the POS Devices (Point-of-sale systems enable retailers to manage inventory and employees and to process sales) that are installed at Kirana stores and allow customers to scan items and make payments.
    • Data Collection: Data collected by these apps is sold to other businesses and marketing firms which helps them identify market trends and consumer preferences.
    • Quick Loan Disbursements: These apps provide services like immediate loans, merchant loans, and personal loans which are convenient in comparison to the time-consuming processes followed by banks while giving out a loan. These loans enable them to earn 2.5-3 % of the loan amount upfront.
    • Commission Income: These businesses have agreements with brands for a brand placement fee and with providers of everyday necessities like cell phone recharge, bill payment, DTH activation, etc. for commissions on spending.
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    However, despite having such varied and creative sources of revenue generation, these apps function on small profit margins and are unable to earn significant revenues in our country. There are several reasons that keep the profits limited. Earlier, these apps used to charge an MDR (Merchant Discount Rate) to merchants to facilitate transactions. But this measure was scrapped in 2020 to boost and encourage UPI transactions across the nation. So, despite having a large client database, payment methods are unprofitable income sources for these businesses. Such a measure significantly impacts the revenue streams but has also helped these businesses gather large customer bases. All these companies offer no unique services to their customers in comparison to their competitors, and thus, to occupy a larger chunk of the market, these businesses need to spend more on their CAC (Customer Acquisition Costs).

    Having such an enormous number of consumers, of these services, currently reflects upon increasing consumer confidence and readiness to accept digital payments. It may just be that these businesses are looking for the right moment to impose transaction fees on payments. However, it doesn’t seem like it would stop us from using UPI apps if we had an infinite amount of money ……

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