Will UPI remain free to use? | Explained
The Indian government is considering a policy shift that could allow banks and payment processors to charge merchants for UPI transactions. This move aims to address the financial burden of maintaining the UPI infrastructure, which is currently subsidized by the government and absorbed by banks.
Why it matters
UPI is a cornerstone of India's digital economy; introducing merchant fees could impact transaction costs for millions of small businesses and consumers.
The story so far: Payments made on the Unified Payments Interface (UPI) platform have been free so far. However, a new law introduced by the government seeks to change this and allow banks and UPI companies to charge merchants for certain UPI payments.
The fear is that these merchants will, in turn, pass these charges on to customers.
A Merchant Discount Rate (MDR) is basically a fee that merchants have to pay banks and payment processors for the use of their networks. A typical MDR charge has four components — an interchange fee, processing charges, network fee, and tax.
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