Explainer-India's UPI fee shake-up: What changes and why it matters

Mumbai, September 16 - India's popular mobile payments system, the Unified Payments Interface (UPI), which has largely been free to use for the past six years, will soon begin charging merchants a fee for transactions above 2,000 rupees ($21). The new Merchant Discount Rate (MDR) of 0.4% aims to make UPI self-sustainable and encourage its expansion in rural and semi-urban areas.

However, the change has raised concerns that merchants may eventually pass on the fee to consumers, potentially discouraging the use of digital payments. While UPI processed 24.5 billion transactions worth 29,823 billion rupees in August, with a 84% share of India's digital payments by volume and 49% of global real-time payment volumes, some opposition parties have criticized the government's decision, arguing it will increase the burden on consumers.