New Delhi, India – Prime Minister Narendra Modi’s government is poised to levy new charges for using the country’s popular, homegrown instant digital payment system for select merchant transactions, raising concerns for businesses. India’s quasi-governmental National Payments Corporation of India (NPCI) has announced that a 0.4 percent fee will apply from October 15 to all UPI (Unified Payments Interface) transactions above 2,000 rupees ($21) made to businesses. Since its introduction a decade ago, the UPI – which allows customers to make instant payments via apps, free of any cost – has transformed how the world’s largest population makes payments.
From street vendors to global brands in shopping malls, QR codes are everywhere in India, as cash increasingly gives way to digital payments. However, experts warn that the new charges could push businesses out of the system. The move has also triggered a political storm in India, with the opposition accusing Modi of passing on costs to merchants under foreign pressure.
So, what is changing in India’s UPI payments? And who stands to gain and lose? Payments made to businesses worth more than 2,000 rupees ($20.84) will incur a levy of 0.4 percent, capped at 300 ($3.13) rupees.
All person-to-person transactions will remain free. Paying for other services, such as at fuel pumps, for railway tickets, or telecom bills, will have a flat fee of five rupees imposed per transaction. The government is calling the new levy the Merchant Discount Rate (MDR), through which the cost of maintaining the digital payment infrastructure is shifted to businesses.
So far, the costs of operating UPI have been borne by banks and fintech companies, which have also benefitted commercially from the system, while government incentives have supported its zero-MDR model. Under the new policy, the government will bar merchants from passing on the additional cost to customers. However, the reality is already shifting.
Vikas Mahto, who operates an all-purpose grocery store in the National Capital Region, has already started charging a flat five-rupee ($0.05) fee on all transactions above 1,000 rupees ($10.42). The sheer scale of the system is mammoth, setting it apart from other digital payment interfaces around the world. Last month, UPI processed an all-time record of 24.51 billion transactions – that’s 791 million transactions per day, worth more than $10bn daily.
Extract — continue reading at the source.
