India moves to give its instant payments network a business model
India is introducing legislation to potentially overhaul the zero-fee structure of its Unified Payments Interface (UPI) network. The move aims to create a sustainable business model by allowing merchants to pay transaction fees, supporting future infrastructure and security investments.
Why it matters
As one of the world's largest digital payment networks, changes to UPI's funding model could significantly impact the global fintech landscape and digital adoption.
India is taking steps to reshape the business model behind its Unified Payments Interface (UPI), a widely used payments network built by the government, via new legislation that could pave the way for merchants to pay charges on some UPI transactions.
The legislation (PDF) lays the legal groundwork for a potential overhaul of India’s zero-merchant-discount-rate (MDR) regime, under which businesses have not paid fees to accept UPI payments since 2020.
The policy shift comes as UPI has become ubiquitous in India, processing a record 23.66 billion transactions worth ₹29.88 trillion (around $313.4 billion) in July alone, per the National Payments Corporation of India, the operator of UPI.
India scrapped merchant discount rates on UPI transactions in January 2020 to accelerate adoption of the payments network, which instead relied on state incentives to support its operation and development.
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