Starting October 15, India plans to introduce a 0.4% fee for merchants on transactions exceeding 2,000 rupees (approximately $21) within the popular payment system United Payments Interface (UPI). This decision became necessary after the UPI system provided services without any fees for six years. However, transfers between individuals will remain free. According to data, UPI processes 24.5 billion transactions with a total value of 29,823 billion rupees and serves over 550 million users.
Currently, UPI holds 84% of the digital payment market in India by volume and 49% of global real-time transaction share. The introduced fee, known as the Merchant Discount Rate (MDR), is not a tax but is distributed among participants in the payment system, including banks and payment application providers, which is expected to help sustain UPI and expand its reach in rural and semi-urban areas. Critics fear that the introduction of the fee may lead merchants to refuse to accept UPI for transactions over 2,000 rupees, forcing customers to switch to cash.
The comprehensive digital payment system was launched in 2016 and initially included some small fees; however, all charges were eliminated in 2020. According to representatives of the Indian government, the changes in fees are aimed at supporting the continued operation and growth of UPI, while emphasizing that the goal is to keep most payments free.
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