As UPI’s transaction volumes soar, industry and policymakers debate whether higher-value payments should have merchant discount rates, weighing infrastructure costs against the platform’s vital economic benefits.
The debate over whether higher-value Unified Payments Interface transactions should attract a merchant discount rate is about more than who foots the bill for the system’s plumbing. As Business Standard’s opinion wrap noted, the stronger argument is that UPI’s wider economic and social gains outweigh the cost of running the infrastructure. It has reduced the need for cash, improved the tracing of money flows, and made exact-value payments easier, while also helping to normalise digital transactions among users who once preferred notes and coins.
That case rests partly on the scale and speed of UPI’s rise. UPI was launched in 2016 by the National Payments Corporation of India and has since become a core part of India’s digital payments system, enabling instant, round-the-clock bank transfers on mobile apps. Indian Republic said it processed more than 185.85 billion transactions in fiscal 2025, while the World Economic Forum noted that in May 2023 alone it handled 9.41 billion transactions worth Rs14.89 lakh crore. The same broad expansion is why supporters see it not simply as a payment rail, but as part of the country’s financial infrastructure.
The policy argument, however, is not cost-free. Livemint has reported that regulators and industry participants have long wrestled with how to keep the system financially sustainable without undermining adoption, especially after the government removed merchant discount rates on UPI and RuPay transactions in 2020. The New Indian Express also reported in April that parliamentary scrutiny has revived questions over who should pay for operating UPI at such large scale. Even so, the fear among opponents of charging users is that fees could push people back towards cash and blunt the very benefits that made the system successful.
There is also a broader public-interest case for keeping UPI free. The platform strengthens India’s sovereign payments infrastructure, can help cushion local cash shortages, and supports precise, low-friction transactions that are hard to match with physical currency. The World Economic Forum has argued that UPI has already delivered major economic value, including estimated savings running into tens of billions of dollars. On that reading, the system is less a private product than a public utility, and one that policymakers may decide is worth subsidising.
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