UPI transactions fell 1.8% to 24.07 billion in September, while daily payments hit a record 802 million. With a 0.4% merchant discount rate (MDR) taking effect on October 15 for transactions over ₹2,000, the market is assessing how this revenue-sharing model may influence merchant behavior and the profitability of payment service providers.
Unified Payments Interface (UPI) transactions recorded a slight decline in September, totaling 24.07 billion. This 1.8% month-on-month drop comes as the digital payments landscape prepares for a major policy shift—the introduction of a merchant discount rate (MDR) starting October 15, 2026.
While the monthly aggregate volume dipped from the 24.51 billion seen in August, daily usage patterns tell a different story. The system handled an average of 802 million transactions per day, marking a new record high. This suggests that while the monthly number reflected the shorter calendar duration compared to August, the underlying usage habits of consumers and businesses remained strong.
Under the new guidelines from the National Payments Corporation of India (NPCI), peer-to-peer (P2P) payments will continue to be free for users. The new 0.4% fee applies specifically to person-to-merchant (P2M) transactions that exceed ₹2,000. To protect smaller vendors, the framework keeps peer-to-peer merchant (P2PM) accounts receiving less than ₹1 lakh per month outside the scope of this new fee. For high-value transactions, the cost is capped at ₹300, which is intended to limit the financial burden on larger individual purchases.
The transition toward this new fee structure has faced scrutiny, but legal clarity has emerged. The Supreme Court of India recently declined to stay the implementation of the new MDR framework, allowing the October 15 rollout to proceed as scheduled. This decision removes immediate legal uncertainty regarding the deadline.
For investors and market participants, the primary focus is on how merchants and digital payment companies adapt to these changes. While over 96% of merchant transactions—those under ₹2,000—remain unaffected, the new model introduces a revenue-sharing component that was previously absent. Payment service providers (PSPs) and fintech firms are currently updating their backend systems to support these new fee calculations. Additionally, the industry is preparing for a separate 0.02% MDR specifically for capital market-related transactions, which will introduce new cost structures for those platforms.
The next important phase for the sector will be observing merchant behavior after October 15. The key monitorable is whether vendors will absorb these costs to maintain customer convenience or if they will look to change their payment acceptance policies. Furthermore, the impact of these changes on the take-rate and profitability of major fintech companies—which have historically operated with zero-fee transactions to drive growth—will be a crucial detail to track in the upcoming quarterly earnings reports.