After distributing around Rs 100 crore to UPI-based BHIM app users as cashback incentives, the government is going to target merchants and urge them to increase the use of the app at their business places.
The government thinks that incentives through the merchants could drive the usage higher rather than just peer-to-peer payments. For the purpose, it plans to raise a funding of Rs 130-140 crore and then roll out the scheme over the next few weeks.
In April this year, the government announced cashback incentives to lure users and increase the use of the app which had shown a very slow growth then compared to other UPI-based apps.
Incentives offered in the scheme included Rs 51 cashback on a minimum transaction value of just Rs 1 for first-time users. Afterwards, it offered Rs 25 cashback per transaction for 20 unique transactions in a month. However, the scheme was applicable for consumers. It also offered incentives for merchants, which included cashback of up to 10 per cent of a transaction and up to Rs 1,000 per month.
The move was an attempt to follow the trend what other fintech players are following in this segment.
The scheme of cashback incentives, however, received some criticism from industry players. MobiKwik’s co-founder and CEO Bipin Preet Singh said that while the government funded cashback scheme was designed to benefit the entire UPI ecosystem, it actually only ends up benefiting the BHIM app and its user base.
Interestingly, a few weeks after the criticism, the government dropped the incentive plan on BHIM app. However, the withdrawal of incentives was not related to the industry criticism. The government fell short of funds to sustain the incentive plan for not more than three months. Initially, the ministry had approved of Rs 500 crore for it, but it was only on paper.
Besides, the government is adopting other measures to push upward the use of BHIM app. Early this month,
Bihar’s Deputy Chief Minister Sushil Kumar Modi-led Group of Ministers (GoM) has given green signal to incentivising digital payments made through Bhim app and Rupay card.
The proposal, once implemented, will allow consumers to get cashback of 20 per cent of the total goods and services tax (GST) amount paid on a particular item, said Sushil Modi. The cashback or discount would be capped at Rs 100 per transaction.
The development was first reported by ET.