Majority of Indian merchants resist UPI transaction fees: Survey

Merchant acceptance of Merchant Discount Rate (MDR) charges on Unified Payments Interface (UPI) transactions remains low across India, according to a recent survey of small business owners and retailers. The data indicates that only 17% of merchants are willing to absorb a 0.4% MDR on UPI payments, underscoring the broader friction between payment infrastructure operators and the merchant community over cost structures.

The survey found that 41% of merchants surveyed are unwilling to bear any MDR on UPI payments above Rs 2,000, suggesting a significant threshold effect in merchant sentiment. Additionally, 9% of surveyed merchants do not accept UPI payments altogether, indicating ongoing gaps in digital payment adoption despite the platform's rapid growth in recent years.

The findings highlight the ongoing tension in India's digital payments ecosystem. While UPI has emerged as a dominant payment mode, particularly for smaller transactions, merchants continue to seek zero-cost payment options. The resistance to MDR charges reflects concerns about transaction costs eating into already thin profit margins, particularly among small retailers and traders.

These insights come as regulators and payment system operators grapple with sustainability questions around UPI's business model. The Reserve Bank of India has previously indicated openness to reviewing UPI fee structures, though any policy changes remain subject to broader considerations around financial inclusion and digital payments adoption targets.

The merchant sentiment revealed in the survey underscores the need for stakeholders to find equilibrium between maintaining UPI's accessibility and ensuring the platform's long-term viability for service providers and operators.