UPI Apps Cannot Charge Users a Platform Fee for Payments, Clarification States
Amid questions about upcoming changes, it has been clarified that UPI payment apps are restricted from levying any platform fees on users for payments. According to a report in Livemint, this comes ahead of a new rule effective October 15, where a Merchant Discount Rate (MDR)—a fee paid by merchants for payment processing—of 0.4% will apply to many merchant transactions over ₹2,000. However, merchants are explicitly barred from passing this cost on to customers. Industry officials confirmed that consumers will only pay the price displayed by the merchant.
What this means
This is a pre-emptive strike against confusion. As the new UPI merchant fee looms, the fear was that payment apps might try to pass the buck to users, just as some platforms do for booking tickets or ordering food. This clarification draws a clear line in the sand: UPI payments from customer to merchant must remain free for the customer. For banks and fintechs operating UPI apps, this removes any ambiguity about their revenue model. They cannot charge users for P2M transactions. Any revenue must come from the merchant-side fees, ensuring the user experience remains frictionless and free, a key driver of UPI's massive adoption.
Most affected: UPI-first Fintechs and Payment Banks
Key takeaway: The core UPI value proposition for consumers—free person-to-merchant payments—remains protected, reinforcing the focus on merchant-side monetisation.
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