PhonePe CEO explains UPI charges framework, merchant impact

The Reserve Bank of India's decision to implement merchant discount rates (MDR) on UPI transactions has prompted fintech companies to clarify the new pricing structure for merchants and consumers. PhonePe CEO Sameer Nigam has provided detailed explanations of how the charges will be applied across different transaction categories and merchant types.

Under the new framework, UPI transactions above ₹2,000 will attract MDR charges, a shift from the previously free payment model. The structure also introduces a ₹1 lakh monthly transaction limit for certain user categories, creating distinct pricing tiers across different merchant segments. The NPCI has proposed varying charge rates depending on the classification and size of merchants participating in the UPI ecosystem.

The changes are expected to affect the operational models of digital payment platforms, which have relied on high transaction volumes at zero cost to users. Industry observers note that while merchants may face increased costs, the impact on end consumers remains a key consideration, with most peer-to-peer transactions continuing without charges under the current framework.

The merchant discount rate implementation represents a significant regulatory shift aimed at ensuring the long-term sustainability of India's unified payments infrastructure. Payment companies are now adjusting their business strategies to accommodate the new cost structure while maintaining competitive pricing for merchants across different sectors.