● Covered by 1 source · 1 reportMedium impact1 neutral
India introduces legislation to allow merchant fees on UPI transactions
Key points
- New legislation lays groundwork for merchant fees on UPI transactions.
- UPI has processed 23.66 billion transactions in July.
- Merchant discount rates were scrapped in 2020 to boost adoption.
- Potential for ₹50-100 billion in annual revenue by 2028.
Policy Shift for UPI
India is moving to change the business model of its government-built Unified Payments Interface (UPI) network. New legislation has been introduced that could allow merchants to be charged for certain UPI transactions. This marks a potential end to the zero-merchant-discount-rate (MDR) regime that has been in place since 2020, under which businesses have not paid fees to accept UPI payments.
Growth and Funding Challenges
UPI has become widely adopted in India, processing a record 23.66 billion transactions valued at ₹29.88 trillion (approximately $313.4 billion) in July alone. The previous policy of scrapping merchant discount rates in January 2020 was intended to accelerate adoption, with the network relying on state incentives for support. However, as transaction volumes and infrastructure costs have increased, banks and fintech firms have found it difficult to sustain the free merchant payment model.
Industry Support and Sustainability
The proposed legislation is supported by fintech leaders, who argue that allowing the industry to recover some investment costs from merchants will make UPI more sustainable. This would enable continued investments in IT, innovation, and cybersecurity necessary for expansion, while keeping consumer and peer-to-peer payments free. The legislation itself does not impose fees or specify which transactions would be affected, leaving those details for later determination.
Potential Revenue Impact
Market analysts anticipate that this legislation could generate a significant new revenue stream for India's payments industry. Jefferies estimates that introducing merchant charges on higher-value UPI transactions could generate an additional ₹50 billion to ₹100 billion (about $525 million to $1.05 billion) in annual revenue by fiscal year 2028, assuming a fee of 15–30 basis points. Reports suggest that any merchant charges might be limited to larger merchants rather than applied to all UPI transactions.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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Reporting from
India is enacting new legislation to enable merchants to pay charges on some transactions made through its Unified Payments Interface (UPI) network. This policy shift aims to create a sustainable business model for UPI, which has operated without merchant fees since 2020, by allowing payment companies to recover infrastructure and operational costs.