2 hrs ago
India Weighs Selective UPI Fees to Sustain Digital Payments Growth
UPI lets people move money quickly by scanning or tapping.
India made most UPI payments free for merchants, helping the system become very popular.
Now officials are considering a small fee for some larger merchant payments.
Payments between people and small purchases would likely stay free.
Supporters say the fee could help pay for security, infrastructure and new features.
Critics worry that some shops might raise prices or encourage customers to use cash.
The government says the fee would not apply to most transactions.
UPI may also add tools such as voice payments, fraud protection and cross-border payments.
The challenge is to keep UPI simple and affordable while making it financially sustainable.
India is considering limited merchant discount rates on selected UPI transactions while keeping person-to-person payments free.
Proposed models include a 0.25–0.5% fee above ₹2,000 or charges for merchants with annual turnover above ₹1.5 crore.
UPI processed 24,162 crore transactions in FY26 and represented 84% of India’s digital-payment transactions.
Industry experts say fees could fund infrastructure and security but might raise costs or encourage some merchants to favor cash.
The government says most UPI payments would remain free, with any charges decided by an NPCI-led steering committee.
- Who
- The Government of India, the National Payments Corporation of India, payment companies and industry experts are involved in the debate.
- What
- India is considering selective merchant discount rates on some UPI payments while retaining free person-to-person transactions.
- Where
- The proposed changes concern India’s UPI network, which also operates in 11 other countries.
- When
- The debate is taking place as UPI enters its second decade; implementation of the app-volume cap has been deferred until December 2026.
- Why
- Policymakers are examining whether limited merchant fees can support UPI’s infrastructure, security and long-term financial sustainability without weakening adoption.
Support targeted merchant fees
Preserve broad zero-cost access
Financial sustainability
Support targeted merchant fees
A small merchant-level fee could create predictable revenue for UPI infrastructure, security and innovation, while remaining cheaper than card processing.
Preserve broad zero-cost access
UPI’s zero-MDR model helped drive merchant acceptance and consumer adoption; new costs could make the system less attractive.
Effect on merchants and consumers
Support targeted merchant fees
Fees limited to larger payments or larger merchants may have little effect on routine purchases and are unlikely by themselves to change consumer habits.
Preserve broad zero-cost access
Price-sensitive merchants could pass on costs, offer discounts for cash or steer customers toward other payment methods.
Reason for introducing MDR
Support targeted merchant fees
A carefully designed charge should focus on the cost of operating UPI and its long-term sustainability.
Preserve broad zero-cost access
India should not introduce MDR primarily in response to US trade complaints or to protect foreign card companies.
Key facts
- Proposed MDR options
- A 0.25–0.5% fee on merchant payments above ₹2,000, or charges for merchants with annual turnover exceeding ₹1.5 crore.
- FY26 transaction volume
- More than 24,162 crore UPI transactions.
- Daily average
- About 66 crore transactions per day.
- Share of Indian digital payments
- UPI accounted for 84% of digital-payment transactions in FY26.
- Small-value merchant payments
- Eighty-six percent of person-to-merchant transactions are below ₹500.
- Global share
- UPI represented 49% of real-time digital-payment volumes worldwide in 2025.
- App concentration measure
- NPCI’s proposed 30% cap on individual third-party payment apps has been deferred until December 2026.
Quotes
India’s finance ministry
India’s government ministry responsible for finance
“UPI is deeply embedded in the daily lives of consumers because it is simple, fast and convenient. A small processing fee at the merchant level will not change consumer payment habits.”
telegraphindia.com
“A substantial portion of UPI’s growth has been achieved under a zero MDR framework, which has played a pivotal role in driving merchant acceptance and consumer adoption.”
telegraphindia.com
Sources
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