UPI payments are growing in India. Consequently, there is now discussion about implementing MDR (Merchant Discount Rate) on UPI transactions. According to experts, the real question isn't how payment companies will generate revenue, but rather who will bear the MDR costs. If this financial burden falls on merchants, it could impact consumers, small merchants, and the growing use of digital payments.

MDR on UPI refers to the fee charged to merchants for processing digital payments. It's expected that banks and payment companies won't cover the entire cost. Therefore, this additional expense may be passed directly onto merchants. Experts say that while some merchants will initially absorb this cost, it won't be easy for them to do so in the long run.

What will be the impact on consumers?

If MDR is implemented, discounts, cashbacks, and offers available to consumers may be reduced. Many merchants may increase the prices of goods and services to cover the increased costs. This is likely to impact small merchants, grocery stores, and businesses that have recently adopted UPI payments on a large scale. If MDR is implemented even for small transactions, many small merchants may refrain from accepting digital payments.

Will the number of UPI users decrease?

According to experts, if merchants reduce UPI payments or start charging customers additional fees, consumers may lose interest in using digital payments. This could potentially reduce the number of digital transactions in the country, potentially impacting payment companies.

Meanwhile, UPI is not just a payment system, but an essential digital public infrastructure for India. Therefore, it's important to find a solution to MDR that provides investment opportunities for banks and payment companies, while not imposing additional financial burdens on merchants and consumers. If such a decision is not made, the number of consumers using UPI is likely to decline.

PC: Rochak Khabre