76% Users May Move Away From UPI<\/strong><\/p>\n\n\n\nA LocalCircles survey found that 76% of UPI users could shift to other payment methods for purchases above Rs 2,000 if merchants pass the additional cost on to them.<\/p>\n\n\n\n
Among those surveyed, 26% said they would prefer credit cards, while another 26% would return to cash. Debit cards were preferred by 13%, while 11% said they would use bank transfers, NEFT or IMPS.<\/p>\n\n\n\n
Only 20% said UPI would remain their preferred method for larger purchases if an additional cost were imposed.<\/p>\n\n\n\n
Only 14% Willing To Pay Extra<\/strong><\/p>\n\n\n\nThe survey also asked users what they would do if a merchant specifically demanded an additional fee for a UPI payment above Rs 2,000.<\/p>\n\n\n\n
Only 14% said they would pay the additional amount and continue using UPI.<\/p>\n\n\n\n
Another 27% said they would switch to cash, while 26% would use a credit card. Around 14% would use debit cards and 4% would opt for bank transfers.<\/p>\n\n\n\n
This suggests that even though the official MDR is a merchant-side charge, any attempt to recover it from customers could change payment behaviour quickly.<\/p>\n\n\n\n
What Is The New UPI MDR?<\/strong><\/p>\n\n\n\nThe new framework introduces a 0.4% MDR on eligible person-to-merchant UPI payments above Rs 2,000.<\/p>\n\n\n\n
The charge is capped at Rs 300 for transactions of Rs 75,000 or more.<\/p>\n\n\n\n
For example, a Rs 5,000 transaction would attract an MDR of Rs 20, while a Rs 50,000 transaction would result in an MDR of Rs 200.<\/p>\n\n\n\n
Importantly, the government has said consumers should not be charged this amount.<\/p>\n\n\n\n
Small Payments And Person-To-Person Transfers Remain Free<\/strong><\/p>\n\n\n\nThe new MDR will not apply to all UPI transactions.<\/p>\n\n\n\n
Payments of up to Rs 2,000 remain outside the new charge structure. Person-to-person UPI transfers also remain free.<\/p>\n\n\n\n
Small merchants receiving up to Rs 1 lakh per month through UPI QR payments are also exempt under the framework.<\/p>\n\n\n\n
The government has said around 96% of merchant transactions will not be affected.<\/p>\n\n\n\n
Merchants Are Also Reluctant To Pay<\/strong><\/p>\n\n\n\nThe challenge is that many merchants themselves do not want to absorb the new cost.<\/p>\n\n\n\n
A separate survey of more than 32,000 businesses found that only 17% were willing to bear a 0.4% MDR on eligible UPI transactions.<\/p>\n\n\n\n
Around 41% said they would not bear any MDR.<\/p>\n\n\n\n
This creates uncertainty over how merchants will respond once the new framework becomes operational.<\/p>\n\n\n\n
UPI Handles Billions Of Transactions<\/strong><\/p>\n\n\n\nThe potential impact is significant because UPI has become India’s dominant digital payment platform.<\/p>\n\n\n\n
In August 2026, UPI processed 24.51 billion transactions worth Rs 29.82 lakh crore.<\/p>\n\n\n\n
Merchant payments alone accounted for 15.51 billion transactions worth Rs 8.95 lakh crore. Transactions above Rs 2,000 represented 67% of the value of those merchant payments.<\/p>\n\n\n\n
Therefore, although the new MDR affects a relatively smaller portion of transactions by volume, it applies to a significant share of the money flowing through merchant payments.<\/p>\n\n\n\n
Government Says Customers Should Not Be Charged<\/strong><\/p>\n\n\n\nThe government has repeatedly maintained that the MDR should not be passed on to consumers.<\/p>\n\n\n\n
Banks have been asked to ensure merchants do not transfer the cost to customers, while UPI apps cannot impose additional platform fees or hidden charges.<\/p>\n\n\n\n
The bigger question now is whether merchants will follow the framework or find other ways to recover their higher payment-processing costs.<\/p>\n\n\n\n
If merchants start demanding additional money for larger UPI payments, the survey suggests consumers could quickly return to cash and cards for high-value purchases.<\/p>\n\n\n\n
Summary<\/strong><\/p>\n\n\n\nFrom October 15, a 0.4% MDR will apply to eligible UPI merchant payments above Rs 2,000, although the government says consumers should not bear the charge. A LocalCircles survey suggests 76% of users could shift larger payments to cash, credit cards, debit cards or bank transfers if merchants pass on the cost, potentially challenging UPI’s dominance in high-value transactions.<\/p>\n","protected":false},"excerpt":{"rendered":"
UPI Faces A Major Change From October 15 India’s Unified Payments Interface is set for a major change from October 15, when a 0.4% Merchant Discount Rate will apply to certain person-to-merchant UPI payments above Rs 2,000. While the new charge is officially imposed on merchants and not consumers, a new survey suggests that the […]<\/p>\n","protected":false},"author":30,"featured_media":1314483,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[7418,41],"class_list":["post-1314479","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-mdr","tag-upi"],"acf":[],"yoast_head":"\n
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