UPI merchant fees risk pushing small retailers back to cash, warns RAI

The Retailers Association of India (RAI) has raised concerns over potential merchant fees on Unified Payments Interface transactions, warning that such charges could undermine years of progress in formalising India's retail sector and pushing digital adoption.

The industry body argues that levying fees on UPI payments—the country's dominant digital payment method—could incentivise small retailers to revert to cash-based transactions, reversing the momentum built during the economic formalisation drive. This risk is particularly acute during the festive season, when consumer spending peaks and merchants handle significant transaction volumes.

According to RAI, the introduction of UPI merchant charges would create a cost burden for small retailers already operating with thin profit margins. This could erode the economic case for digital payments that has underpinned their rapid adoption across India's informal retail landscape.

The association's warning highlights the delicate balance policymakers must maintain in implementing payment infrastructure charges while protecting the financial viability of small merchants. As India's digital payment ecosystem matures, stakeholders are closely monitoring any regulatory changes that could affect merchant adoption rates and consumer transaction patterns.

The concerns come as India prepares for its peak retail season, when payment infrastructure and merchant incentives play a critical role in transaction volumes and economic activity.