Credit cards have an associated merchant discount rate (MDR) of 2-3 per cent that either erodes merchant margins or gets indirectly transferred to customers.
Mumbai: India’s Unified Payments Interface (UPI) continues to dominate the digital payments landscape, and this is evident by the fact that UPI transaction volumes surged to 93.23 billion in the second half of 2024. According to data released by the National Payments Corporation of India (NPCI), this is a growth of 42 per cent year-on-year (YoY). Now, the government is reportedly working on plans that are likely to make usage of UPI cheaper than using credit cards.
According to a report in livemint, the Consumer Affairs Ministry is exploring a mechanism to pass on the cost advantages of UPI directly to consumers.
The report suggests that if things go as planned, UPI users could get an automatic price advantage as they would be required to pay Rs 98 for something that would cost Rs 100 with a credit card.
2-3 Per Cent MDR On Credit Cards
Credit cards have an associated merchant discount rate (MDR) of 2-3 per cent that either erodes merchant margins or gets indirectly transferred to customers. UPI has no such cost burden, making it a more cost-effective way of paying.
According to Shams Tabrej, CEO at Ezeepay, the suggestion to make UPI payments more affordable than credit card transactions is a practical way of optimising cost-effectiveness in digital transactions.
“If the customer is provided with a clear price benefit for using UPI, for instance, paying Rs 98 rather than Rs 100, it might make an impact on daily purchase behaviour and enhance transparency in retail pricing. With speeds of UPI transactions also set to double from June 2025, this policy can potentially emerge as an even more desired payment mode” he said.
Purpose Behind The Move
The move is expected to further encourage the adoption of UPI. According to the report, the ministry is expected to hold consultations with all the concerned stakeholders. The stakeholder meeting is expected to take place in June, and a final blueprint could be developed after that.
