How UPI Apps Make Money: In the era of Digital India, UPI apps have made our life extremely easy. Now neither the hassle of keeping cash, nor the bank needs to make long rounds. Just open an app on mobile and money is transferred to seconds. It has become common to pay by scanning QR code everywhere from street paan to large shopping malls. But have you ever thought that apps like Google Pay, PhonePe, Paytm that allow us to send and take money for free, how do they earn themselves? If this question also comes to your mind, then let us understand it easier and deeply.
1. Not directly earning from UPI transaction, but…
First of all, it is important to know that the Reserve Bank of India (RBI) has not imposed any fee on UPI transactions, that is, when we pay from UPI, no fee is charged from the sender nor the person who is not available. In such a situation, the path of direct earning seems to be closed, but actually the business model of these apps is quite smart. They earn money through our payment data, partnership, and different service.
2. Commission from Merchant Payment
When you pay the UPI app on a shop, restaurant, petrol pump or online store, many times the merchant has to pay the payment gateway fees. This fee is not available on small transactions, but apps on large or special payment mode (eg credited UPI) get commission in the form of merchant discount rate (MDR). Platforms like PhonePe and Paytm earn well, especially from big brands and e-commerce companies.
3. Bill payment and recharge service benefits
These apps have many services like electricity, water, gas, mobile recharge, DTH recharge, metro card recharge. Whenever you pay through them, the company gets a commission from that service provider. Even though you find this transaction free, it generates this revenue for the company in the backnd.
4. Earnings by selling loans and insurance
Nowadays UPI apps are not limited to payment only. Google Pay, Paytm, PhonePe has also started selling personal loans, short-term credit, and insurance products. They provide a loan process by tie-up with banks and NBFCs, and they get a referral commission on every approved loan. Not only this, these apps earn profits by selling health and travel insurance policy.
5. Revenue from investment products
On these apps you get options to invest in mutual funds, gold bonds, digital gold, and even stock market. Whenever a user invests money in these plans, the app gets a small processing fee or commission from that transaction.
6. Data Analytics and Targeted Marketing
Although this part is directly associated with the privacy of the user, companies analyze your payment pattern and spending habits while remaining in the legal purview. Based on this, they show you targeted offers, cashbacks, and discounts, which motivates you to shop and gives them commission from partner brands.
7. Premium features and subscription service
Companies like Paytm also offer premium service to their users, such as fast toll payment (fastag), increase wallet limit, or advance payment solution for business account. The charge is taken from the user or businessman for these services.
8. Earning from advertisement
When you open the UPI app, you often see the promotion of brands offers and products. These advertisements are also a major source of companies’ earnings. The larger the user base, the more advertising opportunity, and the more earning.
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