India introduces merchant fee for larger UPI transactions
India has introduced a 0.4% merchant fee on digital payments exceeding ₹2,000 (about $21) through its Unified Payments Interface (UPI), marking the end of years of free processing fees for merchants. The change takes effect from October 15 and is aimed at making UPI financially self-sustaining as it processes billions of transactions monthly. While consumers will still use the service for free, larger businesses may now face additional costs that could impact their margins. The move follows a legal amendment in August allowing merchant fees on certain UPI payments after years of zero-fee operation since 2020. The National Payments Corporation of India (NPCI) estimates annual operational costs at ₹200 billion ($2.1 billion), and the new fee is intended to cover these expenses while funding infrastructure, cybersecurity, fraud prevention, and customer service improvements. The introduction has sparked debate over its potential impact on UPI’s widespread adoption. NPCI aims to mitigate concerns by exempting small merchants from fees and using part of the revenue to expand digital payment access in rural areas.
Topics: digital payments India merchant fees regulatory change UPI