PhonePe, Razorpay chiefs say UPI will stay free for users, back sustainable model
PhonePe and Razorpay leaders affirmed UPI payments will stay free for consumers. They support sustainable revenue models for payment infrastructure and businesses. Larger businesses may face merchant charges, while small merchants remain exempt. This follows parliamentary approval to allow charges on digital payment modes. Future charges will be borne by businesses, not by customers.
PhonePe CEO Sameer Nigam and Razorpay CEO Harshil Mathur have stated that Unified Payments Interface (UPI) payments will continue to be free for consumers, while advocating for a sustainable revenue model. Mathur emphasized that both consumers and small merchants must be protected, but UPI requires a sustainable economic framework to ensure ongoing investment in reliability, security, and innovation. Without such a model, the system risks deterioration.
The Payments Council of India (PCI) recently endorsed charging larger businesses for the use of UPI, arguing that the revenue would assist banks and payment providers in funding technology, cybersecurity, and fraud prevention. The council maintained that small businesses, including traditional stores, should remain exempt from any merchant service charges.
The Taxation and Other Laws (Amendment) Bill, 2026, recently passed in the Lok Sabha, removes the legal prohibition on banks and payment companies charging the merchant discount rate (MDR) on selected digital payment modes.
The amendment does not specify the MDR, the rate, or the threshold for its application. Finance Minister Nirmala Sitharaman dismissed concerns that the bill would eliminate free UPI payments for users, asserting that any future MDR would be borne by businesses, not customers. The National Payments Corporation of India (NPCI)-led UPI and Services Steering Committee will review the MDR post-parliamentary approval of the bill.
MDR, a fee paid by merchants to banks and payment providers for processing digital transactions, has been zero for UPI since January 2020. This has left the ecosystem reliant on government incentives and other financial products for revenue. Reports suggest the government is considering an MDR of 5-7 basis points for large merchants with a turnover of Rs 1-1.5 crore or more.
Smaller merchants and peer-to-peer payments are expected to remain exempt from such charges. A parliamentary standing committee proposed a graded MDR for larger merchants, coupled with three years of incentives and cashbacks for low-value payments in tier-3 to tier-6 cities. As of July, UPI processed 23.6 billion transactions amounting to Rs 29.9 lakh crore, with PhonePe and Google Pay accounting for nearly 80% of the volume.
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