Merchant fees on UPI transactions: Will your payments get costlier?
What's the story
The Indian government is considering reimposing merchant charges on Unified Payments Interface (UPI) and RuPay debit card transactions for large merchants.
The move comes after the fees were waived in 2022, when businesses were not required to pay any charges for UPI or RuPay debit card payments made by customers.
Before 2022, merchants had to pay a nominal fee, called the merchant discount rate (MDR), to banks for processing UPI and RuPay debit card transactions.
MDR reinstatement
Will MDR be borne by UPI users?
If MDR charges are reintroduced, it won't directly affect users as they wouldn't be charged a fee for making payments. The fees would be paid by merchants.
One banker told the Economic Times that a formal proposal has been submitted to the Union government by the industry (banks) suggesting this change, and relevant departments are now considering it positively.
Fee justification
Large businesses already pay MDR for card payments
Large businesses already pay MDR for card payments made via Visa, Mastercard, and credit cards.
Industry players believe these businesses should also bear charges for UPI and RuPay debit card transactions.
Payment companies maintain that reinstating MDR is essential for their business sustainability as compliance costs have risen with new regulations.
Without a fee on UPI payments, many businesses in this sector may find it hard to remain profitable.