Observed Signal · Aug 4, 2026 · Policy Update · Source: techcrunch · Impact: 4/5 · Sentiment: Neutral
India proposes merchant fees for UPI payments
India has introduced legislation to create a legal framework that could allow merchants to be charged on some Unified Payments Interface (UPI) transactions, potentially ending the zero-merchant-discount-rate (MDR) regime that has kept merchant UPI acceptance free since January 2020. The bill does not itself set fees or define which transactions would be charged; those details would be decided later. UPI processed a record 23.66 billion transactions worth ₹29.88 trillion in July 2026, according to the National Payments Corporation of India (NPCI). Analysts and brokerages (Jefferies, Bernstein) say targeted merchant charges on higher-value transactions could create a meaningful new revenue stream for banks, payment apps and fintech firms while preserving free consumer and peer-to-peer payments.
Legislation would change a long-standing zero-MDR policy and could create a significant new revenue stream for banks, payment apps and fintech firms; it affects major market participants and international UPI deployments.
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Key Takeaways & Evidence Grounding
- India introduced legislation to lay legal groundwork to allow merchants to be charged on some UPI transactions, potentially changing the zero-merchant-discount-rate (MDR) policy.
- UPI processed a record 23.66 billion transactions worth ₹29.88 trillion in July 2026, per the National Payments Corporation of India (NPCI).
- India removed merchant discount rates on UPI transactions in January 2020 to accelerate adoption.
- Jefferies estimated that introducing merchant charges on higher-value UPI transactions could generate an additional ₹50 billion to ₹100 billion in annual revenue by fiscal 2028 assuming a fee of 15–30 basis points.
- Walmart-owned PhonePe and Alphabet’s Google Pay together account for nearly 80% of UPI transaction volumes, according to NPCI data.
Connected Companies & Entities
4 Entities mapped“In a report published on Tuesday, Jefferies estimated that introducing merchant charges on higher-value UPI transactions could generate an a...”
“In a report last week, brokerage firm Bernstein wrote that such an approach would preserve UPI’s consumer-friendly model while creating a me...”
“Walmart-owned PhonePe and Alphabet’s Google Pay together account for nearly 80% of UPI transaction volumes, according to NPCI data....”
“Walmart-owned PhonePe and Alphabet’s Google Pay together account for nearly 80% of UPI transaction volumes, according to NPCI data....”
Ontology Mapping & Concepts
Related Market Signals & Shifts
Recent verified developments and strategic activity across this market segment.
India Imposes Fee on Large UPI Transactions
India's National Payments Corporation of India (NPCI) is introducing a 0.4% merchant fee on Unified Payments Interface (UPI) transactions above ₹2,000 ($21), effective October 15, 2026. This marks a shift from the zero-fee model that has been in place since 2020. The fee is capped at ₹300 ($3) for transactions of ₹75,000 ($783) or more. Small merchants receiving up to ₹100,000 ($1,041) monthly are exempt, as are transactions of ₹2,000 or less. Sectors like railways and telecom will pay a flat ₹5 fee. The move aims to make the UPI system financially self-sustaining, as annual operating costs are estimated at ₹200 billion ($2.1 billion). Revenue from the fees will support infrastructure, cybersecurity, and fraud prevention. Merchants cannot pass the fee to consumers. Fintech firms like Paytm and PhonePe are expected to benefit.
Amazon and Meta Lobby to Challenge UPI Dominance
Amazon, Meta and several Indian fintech and platform players are scheduled to meet with the National Payments Corporation of India (NPCI) to raise concerns about the market dominance of PhonePe and Google Pay on the Unified Payments Interface (UPI). Participants include Amazon Pay, WhatsApp, CRED, MobiKwik and Flipkart’s Super.money. The meeting will discuss proposals such as limits on user onboarding practices, restrictions on use of contact data, fair access to features like autopay and payment mandates, and incentives for smaller competitors. PhonePe and Google Pay together accounted for roughly 80% of UPI’s 22.6 billion transactions in March, while PhonePe recently reported 700 million registered users and 50 million merchants. India previously delayed a rule to cap any single app’s UPI market share at 30% until December 31, 2026.
NPCI CEO: AI to Drive Next UPI Growth Phase
Dilip Asbe, MD & CEO of the National Payments Corporation of India (NPCI), told TechCrunch that AI will play a major role in the next wave of digital payment growth for India’s UPI system — targeting an increase from ~750 million to over a billion daily transactions. Asbe cited AI use cases including user onboarding (voice and multilingual solutions), fraud detection and mule identification, and credit distribution using digital footprints. NPCI has already launched payment-focused models (FIMI) and demoed agentic commerce with partners like Razorpay. Asbe also urged robust regulatory frameworks and suggested opportunities for Indian banks and fintechs to build small, domain-specific language models. The article notes market-concentration risks in UPI (PhonePe and Google Pay dominate) and a planned 30% app market-share cap due Dec 31, 2026.
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