Payments leaders pitch selective UPI MDR to fund infrastructure while shielding small merchants
Industry leaders are debating MDR charges of 25–35 basis points for larger UPI merchants, while keeping consumers and small businesses protected. The proposal aims to support payment infrastructure investment, bank participation and data-led SME lending as UPI scales.
What happened
Payments leaders proposed selective MDR charges on larger UPI merchants to fund infrastructure, while keeping consumers and small merchants protected. The
Key facts
- UPI completes 10 years
- Transactions up to ₹500 cited as high-volume
- Suggested MDR range: 25-35 basis points
- Nearly ₹50,000 crore invested by banks, fintechs and VCs
- UPI expansion target cited from 30% to 80%
Why this matters
Prioritize partnerships or acquisitions in payment infrastructure, merchant analytics and SME lending that benefit from a sustainable, tiered UPI pricing model.
What to watch
- NPCI, RBI or finance ministry consultation language defining 'small merchant,' transaction thresholds, merchant categories or commercial-payment exclusions.
- Union budget or policy announcements on UPI incentive reimbursement, payment-infrastructure subsidies or bank compensation.
- Large bank, acquirer and payment-aggregator commentary on UPI unit economics, merchant servicing costs and willingness to expand acceptance.
- Merchant association responses, especially from organised retail, e-commerce, fuel, utilities, travel and high-frequency QR merchants.
- Changes in UPI transaction mix, failure rates, fraud losses, bank participation or merchant acceptance growth that strengthen the sustainability case.
- Any pilot allowing differentiated pricing for P2M, credit-on-UPI, cross-border UPI or high-value commercial transactions.
- Segment merchant portfolios by GMV, category, UPI share and price sensitivity; identify accounts that could fall above a future MDR threshold.
- Build merchant-facing bundles that justify paid acceptance economics, including reconciliation, settlement analytics, fraud protection and credit offers.
- Increase investment cases for bank and acquirer infrastructure around higher transaction volumes, dispute handling and fraud monitoring.
- Prepare SME lending models using consented transaction data, with clear underwriting, privacy and borrower-protection controls.
- Model merchant steering risk: large retailers may push customers toward cards, wallets, bank transfers or closed-loop payment methods if UPI acceptance becomes chargeable.