India’s Unified Payments Interface continues to dominate the digital payments landscape, but its rapid expansion shows signs of slowdown amid discussions over introducing merchant charges for large transactions, signalling possible shifts in the country’s digital economy.
India’s Unified Payments Interface remains the country’s dominant digital payments rail, but its breakneck expansion is easing. Business Today Bazaar reported that between April and July 2026, UPI handled about 92 billion transactions, up from 74.5 billion a year earlier, yet the growth rate slipped to 23.5% from 33.5% in the comparable period. The slowdown comes as policymakers and payments firms debate whether some large merchant payments should once again carry a fee.
That cooling fits a broader pattern. Business Standard said UPI transaction growth rose about 41.75% in fiscal 2024-25 before easing to around 30% in fiscal 2025-26, even as the platform became deeply embedded in everyday commerce. The Reserve Bank of India’s annual report, as cited by Business Upturn, said UPI crossed 200 billion transactions in fiscal 2025-26 and accounted for nearly 86% of retail payment transactions, underlining how dominant it has become despite the slower pace of expansion. Industry updates also point to a user base that keeps widening, with IBEF saying UPI had onboarded 55.49 crore users by June 2026.
The value passing through the network is still rising even as transaction counts grow less quickly. Business Today Bazaar said UPI transaction value increased by about 20% in the first four months of fiscal 2026-27, after value growth of 18.5% in the previous full year. That suggests people are still using the system heavily, and for larger sums, even if the volume spike seen in earlier years is no longer repeating at the same pace.
The policy debate now centres on who should pay for that scale. Since 2020, UPI has operated with zero merchant discount rate, or MDR, a fee normally charged to merchants for processing digital payments. Fintech and payments companies argue that a zero-fee model leaves too little room to fund customer acquisition, cashback and merchant onboarding. Supporters of the status quo say cheap public digital infrastructure has been central to UPI’s rapid adoption. Business Today Bazaar reported that after the Lok Sabha passed the Taxation and Other Laws Amendment Bill on August 6, the government could consider MDR on large merchant UPI payments above ₹2,000, with discussion around a rate of roughly 0.25% to 0.40%. Any final design, however, remains unsettled, and it is still unclear whether customers would face any direct charge.
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