Big UPI Shake-Up: Merchant Fee Plan May Be Announced Soon
What Happened
A government notification on introducing a Merchant Discount Rate (MDR) for certain business UPI transactions is expected soon. Under a proposed structure, merchants would pay around 40 basis points (0.4%), with the fee split among participants in the payments ecosystem. Issuing banks are expected to receive 40% of the fee, while payment apps such as PhonePe and Google Pay, and acquiring banks would get 30% each.
Key Takeaways
The proposed MDR is expected to apply mainly to large merchants and potentially transactions above ₹2,000, while individual users, person-to-person transfers, and small merchants are expected to remain outside the fee regime. The move would partly reverse six years of zero-MDR UPI payments and create a new revenue stream for banks and fintech firms that have argued the current model is financially unsustainable.