UPI MDR could shift focus from volumes to high-value payments

The introduction of merchant discount rate (MDR) on higher-value UPI transactions could change the economics of India’s payments business, nudging companies away from chasing transaction volumes towards monetisable use cases built around larger merchant payments.

Under the revised framework, eligible person-to-merchant (P2M) transactions above Rs 2,000 will attract an MDR of 0.4%, capped at Rs 300 for transactions of Rs 75,000 and above. By keeping smaller transactions outside the levy, the framework effectively creates two sets of economics for UPI—free for everyday payments, but with a revenue opportunity at the higher end.