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Informist, Thursday, Sept. 24, 2026

 

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--NPCI MD: Risk is that 10% of merchants may pass on UPI fee to consumers
--NPCI MD: Huge miscommunication among consumers, merchants over UPI fee
--NPCI MD: Ecosystem has to ensure merchant fee not passed on to customers
--NPCI MD: Don't see major impact on UPI transaction volume from merchant fee
--NPCI MD: Talking to Nepal, one more country to enable remittances via UPI
--NPCI MD: Working on enabling remittances via UPI
--NPCI MD: Working on launching agentic payments in next few mos
--NPCI MD: Must accept our communication strategy on UPI fee has been poor
--NPCI MD: Small merchant fund to get 5% UPI fee, around INR 30 bln in 3 yrs
--NPCI MD: Believe will be able to implement UPI merchant rate successfully
--NPCI MD: Will have to continue to invest in, use AI
--NPCI MD: Cost of scaling up IT infra for UPI increased significantly
--NPCI MD: Invest in system slowed down due to lack of revenue from UPI
--NPCI MD: Merchant discount rate on UPI required for better tomorrow
--CONTEXT: NPCI MD, CEO Dilip Asbe speaking at 13th SBI Conclave
--NPCI MD: Understand charging merchant discount rate on UPI is painful

 

MUMBAI – The National Payments Corp. of India's communication strategy on the charge for merchant transactions conducted through Unified Payments Interface has been poor, amid wide misinformation in the country, Dilip Asbe, managing director and chief executive officer of the payment service company, said in response to a question at the 13th SBI Conclave Thursday.

 

Investments in Indian financial payments systems have slowed down due to a lack of revenue generated from UPI, Asbe said. Asbe's comments come days after the government announced a merchant discount rate of 0.4% on specified person-to-merchant payments made through UPI for sums above INR 2,000, effective Oct. 15.

 

While imposing the merchant discount rate is "painful", the cost of developing technology has risen, Asbe said. Such developments are required and the pace of these developments has slowed down, he said.

 

The Small Merchant Fund that will be set up will get 5% of the imposed merchant discount rate, Asbe said, which translates to around INR 30 billion in three years, Asbe said. The government had said it will set up a fund to promote use of UPI by small merchants.

 

Speaking on artificial intelligence, Asbe said that NPCI was working on agentic payment systems and will launch this in a few months. NPCI is also working on transferring remittances through UPI and India is in bilateral talks with Nepal and one other country for the same, Asbe said. India is also in multilateral talks through Nexus Global Payments, the Association of Southeast Asian Nations and other such forums, Asbe said.  

 

On the sideline of the event, Asbe said the ecosystem has to ensure that the merchant fee is not passed on to customers. "I don't think the merchants would know that value will come back to them. So I think it's a long-term value which will come back and we'll have to be patient to see that value, how the value is given back to the ecosystem," Asbe said.

 

However, he said there is a risk that 10% of merchants may still pass on the merchant fee to customers. Asbe said only 10% of merchants pass on the fee on credit card to customers which would be the same with UPI. "The merchants will not pass back the charges to the customer, at least for the majority part of the MDR payment. MDR will come from the existing merchants who are paying MDR for credit cards," he said.

  

Asbe does not expect major impact on the volume of UPI transactions due to the merchant fee. "In fact, it (volume) will grow many fold because the ecosystem will push back. Similarly, on the consumer side. We need AI, we need some of the solutions to kind of drive that investments," he said.  End

 

Reported by Cassandra Carvalho and Kabir Sharma

Written by J. Navya Sruthi

Edited by Akul Nishant Akhoury

 

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