NPCI CEO Dilip Asbe clarified that 90% of UPI transactions will stay free, as potential merchant fees will largely be absorbed by companies with over ₹1,000 crore turnover. The initiative includes a ₹3,000 crore innovation fund to expand payment infrastructure while protecting retail users.
The National Payments Corporation of India (NPCI) has addressed concerns regarding potential merchant fees on the Unified Payments Interface (UPI). In a recent discussion at the State Bank of India Banking & Economics Conclave, NPCI Managing Director and CEO Dilip Asbe emphasized that the vast majority of daily UPI transactions will remain free for consumers. According to official projections, approximately 90% of the total value of UPI transactions is expected to remain unaffected by any new fee structure.
At the center of this update is the Merchant Discount Rate (MDR), which is the fee a merchant pays to a bank or payment processor for accepting digital payments. For years, the MDR on UPI has been largely zero, creating a debate on how to sustain the payment infrastructure as volumes grow. The NPCI’s latest stance suggests a focused approach where costs are not shifted to the average user but instead managed by larger entities.
The strategy involves placing the financial responsibility primarily on large-scale corporate entities. Businesses with an annual turnover exceeding ₹1,000 crore are expected to cover about 80% of the anticipated MDR collection. Since these larger firms already handle costs associated with other digital payment methods like credit cards, the expectation is that they will treat this as a standard operational cost rather than passing it on to the end consumer.
To support the growth of the digital payment ecosystem, the NPCI plans to use a portion of the collected fees to fund technological improvements. Five percent of the proposed MDR pool is earmarked for an innovation fund designed to support small-scale merchants and early-stage entrepreneurs. Over a three-year period, this fund could accumulate up to ₹3,000 crore. The goal is to bridge the gap in digital payment infrastructure, particularly in smaller towns and semi-urban areas, ensuring that UPI continues to grow as a reliable payment method.
For investors monitoring the fintech and banking sectors, this update is significant. It signals a move toward a more sustainable revenue model for digital payment operators while keeping the platform accessible for retail users. By shielding individual consumers and smaller merchants from these costs, the regulator aims to maintain the high adoption rate of UPI. The stability of the UPI ecosystem is vital for banks and fintech companies, as it underpins a massive portion of the digital financial services market in India. Investors may continue to watch how these fee structures are implemented and how they impact the bottom lines of the largest corporate merchants over the coming quarters.