“Introducing fee-based transaction charges on UPI payment transactions would drive a wedge into India's already-disrupted digital payment ecosystem” Kunal Jhunjhunwala, Founder of airpay

India's digital payments market is one of the fastest-growing globally, yet cash still dominates, especially in tier-2, tier-3 cities and rural areas. Infrastructural barriers like bad internet connectivity, smartphone penetration, and unavailability of last-mile payment alternatives like PoS (point-of-sale) devices serve as stumbling blocks in accepting any digital payment method. Other factors that hinder this transition include behavioral ones, such as trust in cash, fear of digital fraud, and low financial literacy. airpay is trying to nip these challenges by giving rural merchants and underserved community members seamless digital onboarding with multilingual support and interoperability across banks and wallets. Through these educational and local outreach efforts, airpay is laying the groundwork for secure cashless payments to be a part of the user's daily life.

The potential implementation of transaction fees for ATMs and digital payment systems will affect government policy and consumer behavior. With transaction fees for ATM cash withdrawals, consumers will be encouraged to use digital payments since that would make cash withdrawals more expensive. On the contrary, if transaction fees are imposed for digital payments, highly price-sensitive consumers in semi-urban and rural settings will prefer cash, especially for low-value and high-frequency payments such as grocery shopping or commuting under transport. Added transaction costs might discourage the unbanked and underbanked, somewhat averse to formal financial systems. Inclusive digital adoption would require a tiered pricing model for small transactions or offering limited free transactions every month, thus providing momentum to lessen reliance on cash. Fintech also has a key role in building an inclusive and low-cost digital ecosystem, while airpay is keen on eliminating barriers to merchants and consumers in underserved areas. Its focus on flexible transaction models, interoperable platforms, and a seamless onboarding experience means that airpay's mission is to increase access to digital payment systems, even with impending fees, while informing users of the long-term benefits beyond transaction fees.

Introducing fee-based transaction charges on UPI payment transactions would drive a wedge into India's already-disrupted digital payment ecosystem, forcing consumers and small enterprises into an added cost burden for transferring or receiving money. Because UPI supports daily financial activity with little to no charges, it has become a lifestyle payment system in the last few years. A September 2024 LocalCircles survey indicated that in the event of charging transaction fees on UPI platforms, 75% of the users would immediately stop using the platform. The prominent chunk identified will be those price-sensitive users in semi-urban and rural areas of India. Small businesses, especially micro-merchants, rely entirely on UPI due to minimal charges, and the introduction of fees would erode an already precarious profit margin and undermine the entire digitization effort. A balanced solution would be exempting low-value UPI transactions from fees and exploring monetizing premium offerings to keep up with sustaining digital payment adoption among less fortunate groups. Fintech start-ups must find innovative methods to keep digital payments attractive by offering affordable alternatives. At the same time, a collaborative effort should be made between regulators and fintechs to effectively reduce cash dependency and foster greater inclusion in India's burgeoning digital economy.

The introduction of transaction fees into the wider digital payments ecosystem serves all benefits to banks, fintechs, and governments. At the same time, it negatively affects small merchants, gig workers, and particularly low-income users in semi-urban and rural areas, where the use of digital payments is not yet fully developed. These communities see digital payments being adopted mainly for convenience, speed, and free platforms such as UPI. Even small charges-₹2-5 per transaction deter an earning ₹500-700 a day for a vegetable vendor directly from his income. In rural areas, consumers may revert to cash if digital payment methods fail to provide a financial advantage. This has a chance of making the currently fast momentum that India is gaining in digital payments, which crossed a month with more than 11 billion UPI transactions by 2024, becoming the lengthiest in the globe in terms of real-time payment systems slow. A balanced fee structure, such as tiered fees, transaction subsidies in underserved areas, or fee waivers for basic services, is crucial to commercial viability and financial inclusion. The onus lies on fintechs to spearhead endeavors towards developing transparent and user-friendly fee systems, educating users, and exploring alternative ways to monetize, such as ensuring everyone has access to digitized form payments.

The digital economy of 2025 would put resilience and inclusion in the spotlight; fintechs would seek success in defining attributes of inclusivity, security, and interoperability. Inclusivity goes beyond access and requires meaningful usability, especially for rural and semi-urban populations. With rising smartphone and internet penetration, fintechs must develop offline and voice-enabled payment solutions for low-connectivity areas, like Airpay, which is working towards bridging the digital literacy gap using vernacular interfaces for merchant onboarding and payment acceptance. Security is a must to retain user trust; AI-based fraud detection and biometric authentication must be implemented to keep data breaches at bay. Regular awareness campaigns on scams and safety would be needed. The concept of interoperability will drive adoption; users want to transact easily across banks, wallets, and platforms, and this is what runs in Airpay's mind. Building a unified yet modular financial services stack for ease of use would achieve this objective. Finally, partnering with local banks, self-help groups, and community institutions will extend the reach of digital payments. If these areas are embedded into the culture of innovation by fintechs, trust and user-centricity will drive equitable growth towards making India's diverse digital ecosystem resilient in the long run.

As cash digitization grows wider across India, so do the modern cyber threats, which have made security more than just an added feature but a basic element that cuts across everything. At Airpay, safeguarding user trust is non-negotiable. We've embedded security into the core of our platform architecture by addressing global standards like PCI-DSS compliance, tokenization to mask sensitive data, and advanced end-to-end encryption on every transaction. But security is not a "one fix"-thing; it's an evolving discipline and noise dynamism. We have adopted multi-layered security frameworks such as real-time fraud detection, behavior-based risk scoring, and machine-learning algorithms, and we are constantly studying transaction anomalies to effectively counter threats from modern-day cyberattacks. This helps identify and nullify threats even before they grow. For instance, it automatically flags unusual transactions on our platform and asks for additional verification or even an instant lockdown, thus minimizing exposure.

Generative AI is causing an upheaval in the fintech sector by creating financial ecosystems that are smarter, faster, and more secure. In the domain of fraud detection, AI can prevent threats across payment channels by identifying subtle patterns and real-time anomalies. At Airpay, we have implemented an AI-based automation solution to enhance the accuracy and speed of financial transaction processing, while also incorporating fraud prevention capabilities to safeguard user trust. AI generates hyper-personalization by assessing user behavior and financial habits to provide lickety-split products, offers, and credit solutions that foster customer engagement and economic inclusion. In risk management, generative models for predictive analytics help institutions assess creditworthiness and market volatility more accurately. A new risk comes to the fore as AI rises. Fintechs must pay attention to new threats of deepfake-facilitated fraud, AI-assisted phishing scams, and the abuse of synthetic identities. Algorithmic bias also remains a worrying concern that, if unchecked, may alienate select user groups unintentionally. Fintechs must ensure innovation and accountability to continue thriving in this area, and that involves transparency in data practices, explainable AI models, and adherence to regulations. Only then may generative AI be harnessed fully without eroding trust or security from the digital financial ecosystem.

Over the next three years, embedded finance, UPI 2.0, and voice-based transactions will become cornerstones of financial inclusion in Tier 2/3 cities and rural India. Embedded finance will make financial services—like credit, insurance, and savings—available natively within daily transactions, enabling seamless access to working capital and microloans at checkout. UPI 2.0 brings powerful features such as recurring mandates, overdraft facilities, and invoice verification, which benefit small merchants and gig workers by offering more control and flexibility in their financial interactions. Voice-enabled payments will be especially transformative for low-literacy users and non-smartphone populations, helping them transact confidently in their native languages. At Airpay, we’re focused on breaking down digital barriers for Bharat through vernacular-first, low-bandwidth, and offline-capable technologies that allow users to transact even in low-connectivity environments. By deeply integrating with local commerce ecosystems and simplifying merchant onboarding, we aim to make digital payments more intuitive and trusted. The future of India’s digital economy depends on how successfully fintechs can localize innovation. With the right infrastructure, partnerships, and user-first design, the next 500 million users from Bharat will not just adopt digital finance—they’ll thrive within it.

airpay is committed to accelerating India’s journey toward a cashless economy by bridging gaps in accessibility, affordability, and trust.  Airpay's long-term vision is to become an integrative layer for creating financial ecosystems that are inclusive, secure, and scalable in India and other emerging economies around the world. We are working to fast-track India's transition toward a digitally empowered and globally benchmarked financial economy by closing longstanding gaps in access, affordability, and trust. We hope to be present in India for omnichannel payments for small and medium businesses. We are setting up infrastructure for seamless commerce across digital and physical touchpoints, from POS and UPI, via our Dash Checkout Solution- currently live on Shopify as well. With our Automotive Pay, Split Settlement, Vendor Payouts, Campaign Management Platform, Virtual Accounts, and International Card Payments, we further enhance operational efficacy and financial visibility for merchants of all sizes. We are extending its reach beyond India. In Africa, we are helping to power local financial ecosystems via services such as payment gateway solutions, Wakala agent networks, and training via the airpay academy to nurture a generation of digital-first entrepreneurs. Vendor payouts, card issuance, and advances for the Wage Protection Scheme within the UAE are ways we are propping up the financial infrastructure. Airpay Academy is also present in the region to advance its ability to manage financial spending via expense management tools. We are committed to remaining grounded in inclusivity, trust, and innovation in all these growth cycles. By aligning closely with national and regional digitization goals, we seek to become the fintech backbone to usher the under-served markets into the future of finance- securely, seamlessly, and sustainably.