India’s UPI Faces a Price Test: Will Merchants Pay for Digital Payments?
India’s Unified Payments Interface (UPI), the world’s biggest instant-payment network, could start charging merchants a small merchant-discount rate (MDR) on larger transactions to fund its infrastructure, while consumer payments remain free. Proposals center on 0.3-0.5% MDR for transactions above a threshold (around 2,000 rupees), a move that would affect only a minority of volumes but a large share of value. Studies warn that even small fees could deter small and informal merchants and slow UPI’s expansion, risking its network effects. The government aims to balance sustainability with broad access, drawing on examples like Brazil’s Pix, and emphasizes careful design to protect marginal merchants.
