PhonePe CEO and co-founder Sameer Nigam has said that 96% of UPI transactions are expected to remain free, amid ongoing discussions around the Merchant Discount Rate (MDR) for Unified Payments Interface payments. The comments come as the digital payments ecosystem continues to debate how UPI infrastructure and payment service providers can be supported financially while keeping digital payments affordable for consumers.
UPI has become one of India’s most widely used digital payment systems, allowing users to transfer money directly between bank accounts using mobile applications. While customers generally do not pay a fee for regular UPI transactions, payment companies and banks incur costs for processing and maintaining the payment infrastructure.
What Is UPI MDR?
Merchant Discount Rate (MDR) is a fee generally charged on certain digital payment transactions. It is typically paid by the merchant and distributed among different participants in the payment ecosystem, such as payment service providers and banks.
Unlike some card-based payments, UPI currently operates without a general MDR on standard bank-account-based transactions. This has helped accelerate UPI adoption among consumers and merchants, particularly small businesses.
The absence of MDR, however, has also created questions about the long-term economics of operating large-scale digital payment platforms.
PhonePe’s Position on Free UPI Transactions
Sameer Nigam’s comments indicate that the majority of UPI transactions would continue to be available without charges even if changes are introduced to the current MDR framework.
The distinction between different types of UPI transactions is important. UPI payments can involve different payment instruments and transaction categories, and any potential pricing framework would depend on how policymakers and industry participants structure the system.
For consumers, the key concern is whether sending money through UPI could become chargeable. PhonePe’s statement suggests that the vast majority of transactions would continue to remain free.
Why Is UPI MDR Being Discussed?
Payment companies have invested heavily in technology, fraud prevention, customer support and payment infrastructure to process billions of transactions. Industry participants have therefore sought sustainable revenue models for digital payment platforms.
At the same time, keeping UPI accessible and affordable remains important for India’s digital economy. Any changes to MDR would need to balance the financial sustainability of the ecosystem with the objective of maintaining widespread adoption.
What It Means for UPI Users
For everyday users, PhonePe’s comments suggest that most routine UPI transactions are unlikely to be affected by potential MDR changes. However, the exact impact will depend on the final policy framework and which transaction categories are covered.
UPI’s rapid growth has made it an important part of India’s payments infrastructure. As transaction volumes continue to increase, the debate over MDR is likely to remain focused on finding a sustainable model without creating significant costs for consumers