Usage & attitude study
Pay to Pay: The Future of UPI?
Paid UPI could work, but it is fragile. In a Hercules survey of 210 active UPI users, 71.4% would likely keep using UPI under a ₹2 fee on transactions above ₹500, yet only 44.3% are highly committed. 62.8% prefer a flat fee or high-value threshold, and physical cash is the first fallback (average rank 1.8).
Explore the findingsLikely to keep using UPI under a ₹2 fee above ₹500
Rate staying 9 or 10 out of 10 under the fee
Flat fee or high-value threshold over other models
Based on 210 completed responses. Usage & attitude study.
What we set out to answer, and what we found
How can UPI be monetised without triggering a mass migration back to cash?
How valuable is UPI convenience, really?
Respondents rated UPI convenience against carrying cash or cards. That shows how much pricing power the platform actually has.
Would people stay if a flat ₹2 fee applied above ₹500?
A direct churn test. Respondents scored how likely they were to keep using UPI once the fee is introduced.
Which fee structure is most acceptable, and where would users go instead?
We compared a flat fee, a high-value threshold, a percentage fee and a monthly subscription. We also asked people to rank where they would move instead: cash, rival apps, wallets, cards or net banking.
What breaks the deal, and what softens it?
We asked how people would react to merchant surcharges, which value-add features would justify a fee, and whether they would pick a paid premium tier or a free, ad-supported one.
Charging for UPI could work, but it is fragile. 71.4% of users say they are likely to continue using UPI under a ₹2 fee on transactions above ₹500. Only 44.3% are highly committed, so over half the base could move away if friction rises.
Users prefer a flat fee. 62.8% favour a flat nominal fee or a high-value threshold over a subscription or a percentage fee, which keeps checkout simple.
Cash is the main threat, ahead of rival wallets. Asked which payment method they would switch to first, users gave cash the strongest average rank, 1.8.
Merchant surcharges would lose sales at the counter. 54.3% would switch shops or revert to cash if a merchant tried to pass UPI costs on to them.
Value-adds and a premium tier ease the pain. Guaranteed instant cashback is the top reason to accept a fee (45.2%), and a 56.7% majority prefers a paid premium experience over a free, ad-supported one.
Heavy users are the most sensitive to fees. 48.0% rate UPI convenience 9 or 10 out of 10, yet users transacting more than 20 times a week show the lowest willingness to stay under a ₹2 fee (7.0 out of 10).
Prefer Paid Premium
Would pay for a premium experience over a free, ad-supported one
Cash Is the First Fallback
Average rank among alternatives (1 = first choice)
A 48% Convenience-First Core Gives Monetisation a Foundation
How Much Do You Value the Convenience of UPI Compared With Cash or Cards?
% of respondents by rating (out of 10). Base: 210 respondents
View the data behind this chart
| Answer | Share |
|---|---|
| 2 | 3.3% |
| 3 | 2.4% |
| 4 | 3.8% |
| 5 | 4.8% |
| 6 | 9% |
| 7 | 15.7% |
| 8 | 12.9% |
| 9 | 19% |
| 10 | 29% |
01. 48.0% gave convenience a top-box rating of 9 or 10, so nearly half the market treats UPI as close to indispensable. 29.0% gave a perfect 10, the group best placed to absorb transaction fees.
02. The middle is vulnerable. 15.7% rated convenience a moderate 7 out of 10, and that view of UPI's value could easily break under direct pricing.
71.4% Would Stay Under a ₹2 Fee, but Only 44.3% Are Highly Committed
If a Flat ₹2 Fee Applied to Every Transaction Above ₹500, How Likely Are You to Keep Using UPI?
% of respondents by rating (out of 10). Base: 210 respondents
View the data behind this chart
| Answer | Share |
|---|---|
| 1 | 3.8% |
| 2 | 3.3% |
| 3 | 4.8% |
| 4 | 5.2% |
| 5 | 3.8% |
| 6 | 7.6% |
| 7 | 15.7% |
| 8 | 11.4% |
| 9 | 19.5% |
| 10 | 24.8% |
01. 71.4% are likely to continue using UPI under the fee, but only 44.3% are highly committed (rating 9 or 10).
02. The other 55.7% could revert to cash or look for free alternatives.
A Flat Fee or High-Value Threshold Is the Most Viable Path
Which Fee Structure Would You Find More Acceptable?
Single choice. Base: 210 respondents
View the data behind this chart
| Answer | Share |
|---|---|
| Flat fee (e.g. ₹1 or ₹2) | 33.8% |
| Fees only on transactions above a threshold | 29% |
| Percentage-based fee (e.g. 0.1%) | 21.4% |
| Fixed monthly subscription | 15.7% |
01. 33.8% find a flat fee of ₹1 or ₹2 acceptable, and another 29.0% prefer keeping small transactions free by charging only above ₹2,000. Together, 62.8% favour these two structures.
02. Only 15.7% accept a monthly subscription and 21.4% a percentage-based fee.
Fees Pose an Immediate Cash-Reversion Risk
If Your UPI App Starts Charging a Fee, Which Alternative Would You Switch To First?
Average rank, lower = more preferred. Base: 210 respondents
View the data behind this chart
| Answer | Value |
|---|---|
| Physical cash | 1.80 |
| Digital wallets (prepaid balance) | 1.95 |
| A different UPI app that is still free | 1.96 |
| Net banking | 2.11 |
| Debit or credit cards | 2.24 |
Ranked First Choice, by Alternative
% of 210 respondents ranking each option first
View the data behind this chart
| Answer | Share |
|---|---|
| A different UPI app that is still free | 27.1% |
| Physical cash | 24.8% |
| Digital wallets (prepaid balance) | 20.5% |
| Net banking | 14.8% |
| Debit or credit cards | 12.9% |
01. Physical cash has the strongest average rank (1.8) and the top Borda score (171), just ahead of digital wallets (1.95, Borda 170) and a free rival UPI app (1.96, Borda 169). Cards (2.24) come last.
02. 46.2% would consider switching to another free UPI app, and 27.1% would make it their first move. Among those who consider cash, 62.7% rank it their first choice.
03. Women lean more towards cash, ranking it at 1.68 on average against 1.87 for men. The report treats gender differences as directional only.
Merchant Surcharges Risk Cash Reversion or Shop-Switching for 54.3%
If a Merchant Asks You to Pay a 'Surcharge' to Cover Their UPI Costs, How Would You Respond?
Single choice. Base: 210 respondents
View the data behind this chart
| Answer | Share |
|---|---|
| Switch to paying with cash | 30.5% |
| Look for another shop that does not charge | 23.8% |
| Negotiate or complain to the merchant | 23.3% |
| Pay the extra amount without issue | 22.4% |
01. 30.5% would revert to cash to avoid a surcharge and 23.8% would leave for a merchant that does not charge extra. That is 54.3% in total.
02. Only 22.4% would pay the extra without fuss. Even 32% of those who otherwise accept a flat platform fee would walk away from a merchant surcharge.
Instant Cashback Is the Strongest Fee-Justifier
Which Value-Add Features Would Make You More Willing to Pay a Small Fee?
Multi-select (average 1.45 choices); % of 210 respondents selecting each
View the data behind this chart
| Answer | Share |
|---|---|
| Guaranteed instant cashback on every paid transaction | 45.2% |
| Priority customer support for payment failures | 36.7% |
| Enhanced fraud protection and insurance | 32.9% |
| Integrated expense tracking and budgeting tools | 28.6% |
| None of these would justify a fee | 1.4% |
01. Guaranteed instant cashback leads at 45.2%, ahead of priority support for payment failures (36.7%), enhanced fraud protection (32.9%) and expense tracking (28.6%).
02. Only 1.4% say no feature would justify a fee, so resistance to charging can be bargained down.
03. Women lean towards cashback (50.7%, 8.4 points above men), while men lean towards fraud protection (37.2% vs 24.7% of women). The report flags gender differences as directional only.
04. The most natural pairing is expense tracking plus priority failure support (lift 1.14, chosen together by 11.9% of respondents).
A 56.7% Majority Prefers a Paid Premium Experience Over Free With Ads
If You Had to Choose, Which Would You Prefer?
Single choice. Base: 210 respondents
View the data behind this chart
| Answer | Share |
|---|---|
| Pay a small fee for a faster, premium experience | 56.7% |
| Keep UPI free but with more ads | 43.3% |
01. 56.7% would pay a fee for a premium experience rather than accept a free, ad-supported model. 43.3% would keep UPI free with ads.
02. For more than half the market, a better experience matters more than saving the fee.
Heavy UPI Users Show the Highest Churn Propensity
Convenience Rating and Willingness to Stay Under a ₹2 Fee, by Weekly UPI Transactions
Mean ratings out of 10
View the data behind this chart
| Values UPI convenience | Likely to keep using under a ₹2 fee | |
|---|---|---|
| Less than 5 | 7.341 | 7.295 |
| 5 to 10 | 7.868 | 7.245 |
| 11 to 20 | 7.959 | 7.98 |
| More than 20 | 8 | 7 |
01. Users transacting more than 20 times a week rate convenience highest (8.0) yet show the lowest willingness to stay under a ₹2 fee (7.0). Moderate users (11 to 20 times) hold up best at 7.98.
02. Willingness to stay under the fee averages 7.352 out of 10 overall. Users who rate convenience a perfect 10 (61 people) average 8.59. That falls to 6.266 for the 109 users who rate convenience 8 or below.
03. Inside the perfect-10 group, the 22 who transact more than 20 times a week average 7.955, against 8.949 for the other 39. Heavy users are the more fee-sensitive here too.
04. Among high-convenience users, 104 of 121 (86%) remain highly likely to stay under the fee. The report treats this link between convenience and fee tolerance as directional only.
What we would recommend
Practical priorities drawn from this study for further validation.
Skip blanket fees and roll out in a targeted way, backed by value.
Only 44.3% are highly committed to staying under a ₹2 fee, which leaves over half the base volatile. Start with soft launches, clear value-adds and strict ecosystem controls.
Use a flat fee, which is what users expect.
62.8% favour a flat nominal fee or a high-value threshold. A flat ₹1 or ₹2 fee charged only above a threshold such as ₹2,000 leaves frequent, low-value daily payments alone and keeps checkout simple.
Guard against users going back to cash.
Physical cash is the first fallback (average rank 1.8). Marketing should keep reminding users that digital payments are safer, faster and leave a record, which cash does not.
Enforce a strict no-surcharge rule for merchants.
54.3% of users would switch shops or revert to cash if small merchants passed UPI costs on to them. Set non-surcharge policies and give merchants materials that help them avoid charging customers.
Pair any fee with a premium tier and instant rewards.
A 56.7% majority prefers a paid premium experience over a free, ad-supported one, and guaranteed instant cashback is the top fee-justifier for 45.2%. Attach any fee to rewards users get immediately.
Run two tracks side by side.
Introduce a flat ₹1 to ₹2 fee only on transactions above ₹2,000, and launch an ad-free premium tier for power users. This leaves daily usage alone, matches the 62.8% preference for flat structures and earns revenue from users who will pay for a better experience.
