The Myth of “Free” Fintech in India
India’s fintech revolution began with one big promise — “no charges.” From zero-fee UPI transfers to lifetime-free wallet accounts, the ecosystem grew rapidly on the back of free access. But in 2025, the question is changing: can “free” still fund a sustainable fintech economy?
The average Indian makes over 65 digital transactions a month, mostly through UPI. Every transaction has a cost — server maintenance, fraud monitoring, settlement fees — but users rarely see them. Fintech players absorb those costs to gain market share and data, a tactic that has worked so far but may not scale indefinitely.
In 2024, RBI allowed a marginal interchange fee for merchant UPI transactions above ₹2,000. This triggered a wave of debate on the “free UPI” narrative and its impact on digital inclusion. Fintechs had to find new ways to recover costs — subscriptions, advertising, or premium features — while keeping basic use free. The evolution of these charging models is documented under Upi Monetization Framework.
According to PwC India’s 2025 Fintech Revenue Survey, 72 percent of Indian users still expect fintech services to be “completely free,” even as companies pivot to sustainable pricing structures. That tension between access and profit defines the modern Indian fintech story.
Insight: In fintech, “free” is a growth hack — but “fee” is what keeps the lights on.How Indian Apps Actually Make Money
Behind the friendly UI and cashback banners lies a complex monetization engine. Indian fintech apps deploy multiple revenue models to offset free usage and stay profitable. Here’s how they work.
1. Cross-selling and Partner Commissions: UPI apps earn indirectly by offering loans, insurance, and mutual funds through in-app partnerships. Each conversion brings a commission from the financial institution. This model is part of India’s wider Fintech Cross Selling Strategies ecosystem.
2. Subscription Tiers and Premium Access: Wallets like Paytm and CRED introduce subscription plans that offer priority support, faster refunds, or credit rewards. Such “micro-fee” models blend free entry with value-added services.
3. Merchant Tools and APIs: B2B fintechs such as Razorpay and Cashfree earn from business clients through per-transaction fees or subscription APIs for payments, KYC, and compliance.
4. Float Income and Data Analytics: When users store balances in wallets, that float generates interest until withdrawal. Aggregated spending patterns also fuel personalized offers and market insights.
5. Credit and Pay-Later Integrations: Many apps link with NBFCs to earn a share of interest from small ticket loans or Pay-Later features. This credit-led cross-subsidy keeps payment features free for users.
In effect, Indian fintech apps don’t charge users up front — they charge around them. As NASSCOM noted in its 2025 report, the average fintech earns ₹27 per active user monthly from indirect revenues even when UPI is “free.”
Tip: If an app is free, you’re likely the customer and the product — always review data sharing and credit consent permissions.Regulatory Influence and User Perception
RBI and the Finance Ministry are keenly aware of the thin line between inclusion and over-monetization. Every new pricing change is scrutinized for its impact on digital accessibility. The 2025 RBI consultation paper on payment system charges clarified that “free is not mandatory — it’s a market choice.” This statement sparked renewed interest in how fintechs price convenience within legal limits outlined under Rbi Pricing Guidelines.
Public sentiment, however, remains sensitive. When a major UPI app tested a ₹1 fee for instant wallet withdrawals, social media backlash forced a roll-back within days. Users still view digital payments as a public utility, not a paid service. For fintechs, this means balancing sustainability without hurting sentiment.
Regulators have also tightened data usage norms. Apps must disclose how they monetize personal data and obtain explicit consent before sharing with partners. The goal is to make revenue ethical and transparent.
For users, clarity is the new currency. Knowing what you pay for builds trust. And for startups, transparency is a competitive advantage in a crowded market that values honest pricing over stealth charges.
The Future of Fee vs Free Fintech Models
The next phase of Indian fintech will redefine “value.” Free won’t disappear — it will evolve. Apps may offer basic services for free while charging for speed, security, or personalized features. It’s the same logic that made freemium apps successful in gaming and media.
RBI and NPCI are exploring interchange standardization so that costs don’t burden users disproportionately. Meanwhile, startups are experimenting with subscription packs for business payments, cross-border remittances, and data dashboards for MSMEs. These hybrid approaches mark India’s entry into a mature fintech era outlined in Future Of Fintech Revenue Models.
According to a BCG 2026 forecast, India’s fintech revenue pool will reach $25 billion by 2027, with fee-based income contributing over 60 percent. The rest will come from data and embedded finance. This balance between free access and fee innovation will shape India’s fintech identity globally.
Ultimately, the goal is not to end free finance but to fund it sustainably. As long as transparency, trust, and choice remain central, users will happily pay a small fee for big convenience.
Insight: The future isn’t “free or fee” — it’s “free and fair.” Fintech trust will depend on clarity more than cost.Frequently Asked Questions
1. Are UPI payments still free in India?
Yes, person-to-person UPI transfers remain free. Some merchant transactions above ₹2,000 may include a small interchange fee.
2. How do free fintech apps make money?
Through cross-selling, partner commissions, subscriptions, and interest earned on wallet balances.
3. Can RBI regulate fintech fees?
RBI doesn’t set fees but issues guidelines for transparency and ethical pricing under the Payment and Settlement Systems Act.
4. Why are some apps introducing subscriptions?
Subscriptions help apps cover operational costs while offering premium features like faster refunds and priority support.
5. Will digital payments ever stop being free?
Basic services will likely stay free, but value-added features may carry nominal fees as the sector matures.