UPI and Digital Payments in India
Who Pays for UPI? The Zero-MDR Debate
Merchants pay no fee on UPI, so apps and banks earn little from payments, raising questions about how the system will be funded.
Free for users does not mean free to run.
MDR
Merchant discount rate is the fee a shop pays for accepting cards, often around 1 to 2 per cent.
Zero MDR
Since January 2020, the government has not allowed MDR on UPI transactions.
Subsidy
Government incentive schemes have partly compensated banks and apps.
Debate
Apps and banks argue that free payments are not sustainable and want a small fee, while others fear a fee would push people back to cash.
Running the infrastructure costs money even when users pay nothing.
Costs are covered from other sources.
- Zero MDR applies to UPI.
- The government offers incentives.
- Providers want a sustainable model.
- A fee could reduce use.
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