UPI MDR Above ₹2,000: Survey Shows 76% May Shift to Cards or Cash if Fee is Passed On
A recent survey of over 67,000 UPI users suggests that a significant 76% may opt to use cards, cash, or bank transfers for purchases exceeding ₹2,000 if merchants pass on the proposed 0.4% Merchant Discount Rate (MDR) (a small fee paid by the merchant for processing digital transactions). Only 14% of respondents indicated they would continue using UPI and bear the additional cost. This comes as a new MDR framework is set to apply to UPI merchant payments above ₹2,000 from October 15.
What this means
This survey highlights a potential shift in consumer payment behaviour for higher-value UPI transactions if the MDR is indeed passed on. For banks, this could mean a potential dip in UPI transaction volumes and value for Person-to-Merchant (P2M) payments above ₹2,000, while usage of debit/credit cards or net banking might see a resurgence. While the intention of MDR is often to monetise payment infrastructure, its implementation might inadvertently incentivise a return to traditional payment methods for larger transactions, impacting digital adoption rates. Banks should monitor these trends closely to adjust their payment platform strategies.
Most affected: Banks (Payments & Digital Banking), Merchants, Consumers
Key takeaway: Monitor customer payment behaviour post-October 15, as higher-value UPI transactions may shift to other methods if MDR is passed on by merchants.
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