NPCI To Ban All Gaming Transactions Under Rs 50 On Its UPI Channel

On its famous Unified Payments Interface (UPI) channel, the National Payments Corporation of India (NPCI) is likely to permanently ban all gaming transactions under Rs 50. According to multiple sources, the latest rules will go into effect this weekend. The step is geared at reducing transaction volumes on UPI, where a recent boom in transaction rates - owing to increased digital usage in the wake of the pandemic - has resulted in a spike in banking interruptions and technical issues. As per industry sources, NPCI has seen a huge increase in low-ticket recurring transactions (as low as Re 1) conducted by gaming merchants in recent weeks.

These transactions jumped even more during the ongoing IPL matches, causing NPCI and member banks to be concerned that increased transaction volumes could turn to more system outages. To ensure a smoother experience, NPCI wants customers and merchants to use standing instructions (SI) based modes of payment, such as net banking, instead of UPI, according to a source. The source also said that "The credentials of the customer, merchant and the ticket size is known beforehand. SI-based recurring channels are engineered to process such payments."

This viewpoint may be problematic for real-money gaming, which is based on microtransactions. Instead of paying a monthly subscription, gamers pay when they play. This means that most transactions are under Rs 100. According to gaming industry experts, UPI will be used less often in the future. According to gaming industry reports, NPCI had been considering such a restriction for several weeks and had been in close contact with major merchants. As per a second gaming industry report, NPCI's move to ban such transactions is influenced by banking industry stress, as banks have no reason to incur additional loads on their backend networks without the merchant discount rate (MDR), which is the fee that banks impose on merchants to process digital payments. In order to allow more merchants to accept digital purchases, the government revoked MDR in 2019.

According to ET, a source added that "There is a larger conversation between banks and NPCI to curb all recurring low-value transactions as there is no money to be made on processing UPI anymore," said a gaming industry source. "UPI is the preferred mode of payments for over half our customers. A bulk - over 50% -- of our transactions are under Rs 50. This is a huge blow to the industry."