The company is the first digital payments app to have started charging for UPI-based transaction which is being offered for free by its competitors. Like other players, PhonePe is also charging processing fees for payments made through credit cards.

“On recharges, we are running a very small-scale experiment where a few users are paying for mobile recharges. Recharges below Rs 50 are not charged, recharges between Rs 50 and Rs 100 are charged Re 1 and above Rs 100 are charged Rs 2.

Essentially, as a part of the experiment, a majority of users are either not paying anything or paying Re 1,” a PhonePe spokesperson said.

PhonePe has the largest share in terms of UPI transactions among the third-party apps. The company had recorded over 165-crore UPI transactions on its platform in September, clocking over 40 per cent share among the app segment.

To clarify on bill payments, “we are not the only player or payment platform charging a fee. Charging a small fee on bill payments is now a standard industry practice and is done by other biller websites and payment platforms also. We charge a processing fee (called as convenience fee on other platforms) on payments with credit cards only,” the spokesperson added.

According to a Bernstein report released in July, PhonePe and Google Pay continue investing in providing customer incentives and spend on marketing at 2.5-3.0 times while Paytm has streamlined marketing spend from 1.2 times of revenue in financial year (FY) 2017, to 0.4 times in FY20, and now at 0.2 times of revenue (FY21), while growing merchant payments share across wallets, UPI, PoS, and online payments.

The National Payments Corporation of India has placed a cap on the market share for UPI. There can be no player which has a market share of above 30 per cent.

The Bernstein report said that the NPCI market share caps would require PhonePe and Google Pay to dial down their customer incentives, to bring share towards the 30 per cent cap.