PhonePe Wallet Inactivity Fee Triggers User Backlash - ₹100 Charge After 365 Days of No Use

Digital payments giant PhonePe has come under fire for notifying users of the new inactivity fee on its wallet service. The company announced that wallets that are not used for 365 days without loading or spending money are going to be charged ₹100 plus GST every quarter.

www.phonepe.com

There is no way to indicate wallet activity as UPI usage or app login will not count as wallet activity and so many users were surprised by this sudden notification.

The fee will be deducted directly from wallet balances in line with RBI guidelines which allow service providers to levy charges to cover maintenance costs. But that has resulted in frustration from customers, many of whom have small balances and struggle with KYC requirements to withdraw funds or close accounts.

PhonePe has explained that users can avoid the inactivity fee by completing a single wallet transaction (loading money or making a payment) over 365 days. Or customers can empty their wallet balance or turn off the wallet entirely in app settings. But the backlash on social media has been strong with some users demanding that they uninstall the app even though UPI services are not affected.

Industry experts say inactivity fees are common in the fintech industry but when there’s not clear communication there is consumer dissatisfaction from the industry.

In this case, the sudden alerts only heightened concerns. Many users feel as if they have been penalized just by not using the wallet feature. PhonePe may need to do better at transparency and customer engagement to restore trust, they say.

The controversy comes at a time PhonePe is still the dominant player in India’s UPI market and has the biggest market share. Although PhonePe’s core UPI services do not pose a problem, the wallet fee issue highlights the challenges fintech companies face.

PhonePe’s wallet inactivity fee has been widely criticized and communicating clearly is the most important thing in digital finance. As users consider whether to transact or withdraw or deactivate it will be important for PhonePe to address it quickly to maintain trust in an increasingly competitive payments market.