We are living in the era of digitalization. Now almost everything can be done online with just the press of a button. Even payments are increasingly being made online. From buying groceries to paying utility bills, people have started using UPI everywhere. In today’s time, we use UPI for almost every small and big purchase. But what if any transaction fee is imposed on UPI?
Shocking revelation from a survey
A survey has revealed that if any transaction fee is imposed on UPI, then about 75 percent of users in India will stop using this platform. This signals a potential threat to the country’s rapidly growing digital payments ecosystem. The survey highlights how much users value free payments services—even as UPI moves closer to its goal of processing one billion transactions per day. This survey conducted by LocalCircles found that if fees are imposed on UPI, only 25 percent of users will continue using the service. The survey also showed that opposition to such fees has become stronger than in 2025; At the time, 73 percent of people opposed imposing transaction fees.
Demand to impose MDR
Payments Council of India (PCI) has proposed to impose 0.3 percent Merchant Discount Rate (MDR) on big merchants. In fact, there is currently a debate within the fintech sector on whether to maintain the “zero MDR” regime or give more importance to business sustainability. There is a significant technical investment in securing the millions of transactions processed through UPI every day. However, sustaining these expenses over a long period of time without any revenue source—or MDR—proves to be a difficult challenge. Companies like Google, PhonePe and Paytm also do not earn any direct revenue from UPI transactions. As a result, under pressure from investors, these companies are now expected to turn profitable by incorporating MDR. Nevertheless, PCI says the burden of 0.3 per cent MDR should not be passed on to ordinary consumers but should be restricted to large business enterprises. This approach has two distinct benefits: first, it will attract new investment into the digital payments ecosystem, and second, it will help in the development of new technologies.
Government’s stance
The government has termed reports related to imposition of transaction fees on UPI as misleading and baseless. The aim of the government is to promote the digital economy. Due to this, ‘Zero MDR’ policy is in force for UPI and RuPay debit cards from 2020.
