As debate around MDR transaction charges grows, industry leaders are now weighing in with their opinions. many have welcomed it saying it was much needed While some have criticised the move.
Taku said that with the rise of Unified Payments Interface, the cost of maintaining the infrastructure has increased, with the burden falling on banks and payment companies to support those costs. Revenue generated through the MDR would help make the continued growth of UPI and the broader payments industry more sustainable, while supporting banks and payment companies that maintain the underlying infrastructure, according to Taku.
Now that a limited MDR has been introduced, we hope it will contribute to the further growth of the UPI ecosystem. This additional revenue will enable the industry to invest more in expanding UPI,” he added. The government has specified that customers will not pay MDR. Banks have also been advised to ensure that merchants do not pass the MDR cost on to customers.
Noting that 70–80 crore UPI transactions take place every day, Nigam said that the government’s decision to introduce a 0.4 per cent Merchant Discount Rate (MDR) on merchant-related UPI transactions above ₹ 2,000 will help industry generate revenue that can be reinvested into further growth. “We have consistently raised this issue with the government and the RBI…Digital payment systems operate in more than 200 countries worldwide, yet India was the only country where UPI transactions carried no MDR. In fact, MDR rates on credit card transactions typically range from 1.5% to 2.5%, whereas the MDR on these UPI transactions is only 0.4%…To the best of my knowledge, 0.4% is among the lowest MDR rates in the world,” he said. Payments made to merchants up to ₹ 2,000 will also remain free. Under the new framework, merchants accepting UPI payments above ₹ 2,000 will pay a fee, but customers will not have to pay this charge.
Nigam said that he believes the biggest beneficiary will be the customer. This ensures that people across the country can continue to use UPI conveniently while the ecosystem remains sustainable and capable of further growth” “Many merchants are already familiar with the concept of paying MDR. “UPI was free for consumers before, and it remains free for consumers today. The government on Tuesday clarified that UPI payments between two individuals will remain completely free, no matter how much money is transferred.
