Key facts
- India's UPI will impose a 0.4% merchant fee on transactions above ₹2,000 starting October 15.
- Consumers will continue to use UPI for free.
- Small merchants receiving up to ₹100,000 per month are exempt from the new charges.
- Transactions of ₹2,000 or less will remain free for merchants.
- The National Payments Corporation of India (NPCI) aims to make the UPI network financially self-sustaining.
- The annual cost of operating UPI is estimated at ₹200 billion ($2.1 billion).
India has introduced merchant fees on its Unified Payments Interface (UPI) network for transactions exceeding ₹2,000 (approximately $21), ending a period of free processing for businesses. The National Payments Corporation of India (NPCI), which operates UPI, announced that the 0.4% fee will apply from October 15, aiming to make the system financially self-sustaining.
Consumers will continue to use UPI without charge. The new fee structure includes a cap of ₹300 (about $3) for transactions of ₹75,000 or more, and small merchants earning up to ₹100,000 per month will be exempt. Transactions of ₹2,000 or less will remain free for merchants, a threshold that covers over 95% of UPI merchant transactions by volume.
This move marks a significant shift from the zero-fee model adopted in January 2020 to boost UPI's adoption. The NPCI cited the substantial annual operating costs of the network, estimated at ₹200 billion ($2.1 billion), as the reason for introducing fees to fund infrastructure, cybersecurity, and fraud prevention.
While the fees are intended to be absorbed by businesses, concerns have been raised about whether this could diminish UPI's appeal. Former Indian chief economic adviser Krishnamurthy Subramanian questioned the opportunity cost and social benefits of charging UPI transactions, emphasizing its role as digital public infrastructure. The NPCI plans to use part of the collected fees to expand digital payment infrastructure in smaller cities and rural areas.