Fintechs Want MDR
Fintech companies like PhonePe and GPay want the government to introduce MDR or merchant discount rate on UPI transactions. They argue that current zero-charge policy is not sustainable.
UPI May No Longer Be Free! MDR Fees Could Be Coming Soon - What You Need to Know
Fintech firms are urging the government to allow MDR fees on UPI transactions, a move that could end free UPI for users. Here’s what u need to know
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What is MDR?
MDR (Merchant Discount Rate), is the fee that merchants pay to banks and payment providers for processing digital payments. Currently, UPI has a zero-MDR framework, unlike credit or debit cards.
Why Fintechs Want MDR?
Fintechs said that maintaining UPI infrastructure is expensive. Without MDR, it’s hard to cover tech, security, and operational costs. They wanted to earn money that can last long-term.
Fintech's Proposal
Fintech companies, through the Payments Council of India, have proposed 0.3% MDR on UPI transactions over Rs 2,000 for large merchants with annual turnovers above Rs 20 lakh, aiming to sustain the digital payments ecosystem without affecting small merchants.
UPI Providers’ Stance
The National Payments Corporation of India (NPCI), which operates UPI, hasn’t confirmed any policy change yet. It has said it’s studying suggestions but maintains that UPI must remain affordable and accessible for the merchants.
What RBI Said Earlier?
RBI had sought public feedback on charging for UPI on August 2022. But later, the finance ministry clarified there were no plans to impose fees on UPI payments.
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Merchants Response
Many small merchants are worried because if MDR is introduced on UPI transactions, the added costs could be passed on to consumers, just like with credit and debit card payments.
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