India paves way for return of merchant fees on UPI; what it means
The Indian government has introduced a legislative amendment that could allow for the imposition of a Merchant Discount Rate (MDR) on UPI transactions. While the framework is being established, no specific fees or categories have been finalized yet.
Why it matters
Introducing fees to the currently free UPI system could significantly impact the digital payments ecosystem and the business models of major players like Google Pay and PhonePe.
India has taken a step towards allowing merchant charges on Unified Payments Interface (UPI) transactions after proposed amendments to the country's payments law were introduced in Parliament on Tuesday.UPI, among the world's largest real-time payment systems, handled 23.6 billion transactions worth Rs 29.9 trillion ($313.5 billion) in July, according to official figures. The platform is dominated by Walmart-owned PhonePe and Alphabet's Google Pay.What is MDR and why may it be introduced for UPI?Merchant Discount Rate (MDR) is the fee merchants pay to banks and payment service providers for processing digital transactions. In India, credit card payments generally attract an MDR of around 1.5%, while debit card transactions can carry charges of up to 0.9%.
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