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Last Updated:May 19, 2025, 15:48 IST
The consumer affairs ministry is exploring a mechanism to pass on the cost advantages of UPI payments directly to consumers, according to a report.
Credit cards carry a merchant discount rate (MDR) of 2-3 per cent, whereas UPI payments are free of such charges.
In a move that could bring welcome savings to everyday shoppers, the government is considering a plan that would make payments via the Unified Payments Interface (UPI) cheaper than using credit cards.
Credit cards carry a merchant discount rate (MDR) of 2-3 per cent, whereas UPI payments are free of such charges. When you swipe a credit card, the merchant typically ends up paying Rs 2-3 on every Rs 100 spent as MDR, while UPI lets them keep the full amount. In many cases, merchants absorb this cost themselves, but some pass it on to customers.
According to a livemint report citing three people familiar with the matter, the consumer affairs ministry is exploring a mechanism to pass on the cost advantages of UPI directly to consumers.
If this plan is implemented, UPI users could get an automatic price advantage — paying Rs 98 for something that would cost Rs 100 with a credit card.
The move will encourage wider adoption of UPI by offering an upfront discount at the time of purchase — effectively rewarding users for choosing the zero-fee digital payment mode.
According to the report, the consumer affairs ministry is set to hold consultations with stakeholders, including e-commerce platforms, payment service providers, the National Payments Corporation of India (NPCI), the Department of Financial Services (DFS), and consumer rights groups. The final blueprint may be developed after a stakeholder meeting expected in June.
However, not all stakeholders are on board. The Payments Council of India has repeatedly pushed to introduce MDR on UPI and RuPay debit cards, but without success so far.
UPI Transactions To Get Faster From June 16
Meanwhile, UPI transactions are going to get faster and will take just 15 seconds to finish from June 16, 2025, as opposed to the 30 seconds taken at present. This is due to a new NPCI (National Payments Corporation of India) mandate, which has directed a reduction in API response time for various financial and non-financial UPI activities.
UPI has become the dominant digital payment mode in India, clocking 185.85 billion transactions in FY25 — a 42 per cent jump in volume — with the total value reaching Rs 260.56 trillion, up 30 per cent year-on-year.
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