UPI May Get Cheaper Than Credit Cards Under New Govt Proposal

The Consumer Affairs Ministry is weighing a plan to transfer the cost advantage of Unified Payments Interface transactions directly to shoppers, potentially making UPI payments less expensive than credit cards at checkout.

Under the current system, merchants incur a 2-3 per cent merchant discount rate on credit card sales, a cost often absorbed by sellers or passed on to buyers. UPI transfers carry no such fee, allowing businesses to receive full payment amounts.

The proposal under review would offer an immediate price reduction at the point of sale for UPI users. For example, a product priced at ₹100 on a credit card could be offered at Rs 98 when paid through UPI, reflecting the savings from eliminated MDR charges.

Officials aim to boost digital payments adoption by rewarding consumers for selecting a zero-fee option. A consultation session with e-commerce firms, payment operators, the National Payments Corporation of India, the Department of Financial Services and consumer advocacy groups is slated for June.

Some industry representatives, including the Payments Council of India, favor reinstating MDR on UPI and RuPay transactions. To date, the government has declined such appeals.

Separately, the NPCI has set a target to halve UPI transaction times, reducing the current 30-second window to 15 seconds from June 16, 2025, by updating API response standards for financial and non-financial messages.

UPI’s growth trajectory remains steep. During the 2024–25 fiscal year, the system handled 185.85 billion transactions, a 42 per cent increase over the previous year, with a total value of Rs 260.56 trillion, up 30 per cent year on year. In the latter half of 2024 alone, UPI volume reached 93.23 billion.

Consumers should monitor announcements following the June stakeholder meeting for implementation details on discounts and transaction speed improvements.