India's Finance Ministry introduced legislation to end the zero-fee regime for the Unified Payments Interface (UPI). The proposed amendment to the Payment and Settlement Systems Act allows the government to implement a Merchant Discount Rate (MDR) on certain digital payments. UPI and RuPay debit card transactions have remained free for all merchants since January 2020 to encourage adoption.
The policy change aims to create a sustainable business model for the payment ecosystem. Payment providers argue that fees are necessary to cover ongoing infrastructure and maintenance costs.
Proposed fees will likely apply only to large merchants. Transactions for consumers and small businesses are expected to remain free of charge.
This shift significantly impacts major industry players including Walmart's PhonePe and Alphabet's Google Pay. These two companies currently dominate total UPI transaction volumes.