New Delhi, September 16 (Daily Kiran) : PhonePe’s CEO, Sameer Nigam, announced on September 16 that customers will not incur any fees for UPI transactions under the newly implemented Merchant Discount Rate (MDR) framework. He emphasized that this initiative is essential for creating a financially sustainable digital payment ecosystem in India.
In an interview, Nigam clarified that users can continue to utilize UPI without any charges. He also noted that small merchants with an annual turnover of less than ₹1 lakh will be exempt from the MDR system.
“There are no fees for UPI customers. They have never been charged for using UPI, and they won’t be in the future,” Nigam stated. He pointed out that 96% of transactions from larger merchants, which are under ₹2,000, will also remain free of any charges.
For transactions exceeding ₹2,000, a 0.4% MDR will apply, but this cost will be borne by the merchants, not the customers. Nigam explained that the revenue generated from MDR will help support banks and companies involved in the UPI ecosystem.
He highlighted that the industry spends between ₹10,000 crore to ₹12,000 crore annually to maintain UPI infrastructure. This includes significant investments in technology, KYC processes, cybersecurity, risk management, fraud control, merchant chargebacks, and capital expenditure.
“We needed a way for this revenue to flow back into the industry to ensure the sustainable growth of UPI,” he said. When asked about potential additional charges for customers, Nigam reassured that there would be no extra fees for person-to-person (P2P) or person-to-merchant (P2M) UPI payments.
“Customers will not face any charges. Both P2P and P2M payments are free,” he added, noting that merchants responsible for paying the MDR cannot pass these costs onto customers.
Despite the new MDR framework, Nigam believes that India’s digital payment market will continue to grow rapidly. He cited that UPI users increased from approximately 20 million in 2020 to between 500 million and 550 million today.
He concluded by stating that the new revenue model will enable fintech companies to invest more in marketing, innovation, research, and development. “It is crucial for businesses to have the opportunity to earn adequate income,” Nigam asserted.
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