As debate around MDR transaction charges grows, industry leaders are now weighing in with their opinions. While some have criticised the move, many have welcomed it saying it was much needed.
Rallying behind those supporting the charges, MobiKwik co-founder Upasana Taku, hailed the move as a “very positive step” that will help make the payments ecosystem more sustainable as rising infrastructure costs have put pressure on banks and payment companies.
Taku said that with the rise of Unified Payments Interface, the cost of maintaining the infrastructure has increased, with the burden falling on banks and payment companies to support those costs.
Deep Dive
What is the Merchant Discount Rate (MDR) applied to UPI transactions above ₹2,000?
Will customers have to pay MDR when using UPI for shop payments?
How will the new MDR impact the sustainability of the UPI ecosystem?
"It is a very positive step for India. UPI completed 10 years this year, and because of UPI, digital payments have scaled massively in India, with almost everyone using them. But as UPI has grown, the cost of maintaining the infrastructure has also increased, and banks and payment companies have struggled to support those costs. So, this new direction is very positive for the payments industry, banks, and payment companies,” Taku told news agency ANI.
She explained that the change does not affect customers as there are no charges on person-to-person transactions, adding that even small merchants whose total monthly sales are around ₹1 lakh, remain exempted.
{{/usCountry}}She explained that the change does not affect customers as there are no charges on person-to-person transactions, adding that even small merchants whose total monthly sales are around ₹1 lakh, remain exempted.
{{/usCountry}}“The charge applies to large merchants where there are high volumes of payments—for example, booking a flight ticket, shopping on Amazon, or buying expensive items at a mall. For these large merchants, the UPI charge will be 0.4%, which is still much lower than the 1.6–1.8% typically charged for credit-card transactions.”
Also Read: ₹2,000">UPI charges of 0.4% to be levied on merchant transactions above ₹2,000
According to Taku, revenue generated through the MDR would help make the continued growth of UPI and the broader payments industry more sustainable, while supporting banks and payment companies that maintain the underlying infrastructure.
“This revenue will help make the continued growth of UPI and the wider payments industry more sustainable, supporting banks and payment companies that maintain the infrastructure,” she added.
PhonePe CEO welcomes move
Founder & CEO of PhonePe, Sameer Nigam, also welcomed the move, saying the revenue generated from these charges will help the industry recover its operational costs.
Noting that 70–80 crore UPI transactions take place every day, Nigam said that the government’s decision to introduce a 0.4 per cent Merchant Discount Rate (MDR) on merchant-related UPI transactions above ₹2,000 will help industry generate revenue that can be reinvested into further growth.
“We have consistently raised this issue with the government and the RBI...Digital payment systems operate in more than 200 countries worldwide, yet India was the only country where UPI transactions carried no MDR. Now that a limited MDR has been introduced, we hope it will contribute to the further growth of the UPI ecosystem. This additional revenue will enable the industry to invest more in expanding UPI,” he added.
Nigam said that he believes the biggest beneficiary will be the customer. “UPI was free for consumers before, and it remains free for consumers today. This ensures that people across the country can continue to use UPI conveniently while the ecosystem remains sustainable and capable of further growth"
He added that around 60 lakh merchants already pay MDR on RuPay credit cards, Visa cards, and Mastercard transactions.
“Many merchants are already familiar with the concept of paying MDR. In fact, MDR rates on credit card transactions typically range from 1.5% to 2.5%, whereas the MDR on these UPI transactions is only 0.4%...To the best of my knowledge, 0.4% is among the lowest MDR rates in the world,” he said.
UPI merchant fees: Who pays and who doesn’t
The government on Tuesday clarified that UPI payments between two individuals will remain completely free, no matter how much money is transferred. Payments made to merchants up to ₹2,000 will also remain free. Under the new framework, merchants accepting UPI payments above ₹2,000 will pay a fee, but customers will not have to pay this charge.
Does this mean customers will have to pay when they shop?
For transactions till ₹2,000 or below, customers will have to pay no charge. However, on payments above ₹2,000, a 0.4% MDR will apply to some merchant transactions. For transactions of ₹75,000 or more, the MDR will be capped at ₹300 per transaction.
The government has specified that customers will not pay MDR. Banks have also been advised to ensure that merchants do not pass the MDR cost on to customers.
Small merchants have also been exempted from MDR charges as the framework is designed to protect small businesses from additional payment costs.