MDR holds as UPI volumes dip 2%

Authorities have dismissed concerns that reintroducing merchant discount rates (MDR) on UPI transactions above ₹2,000 would curb adoption, even as volumes fell 2% month-on-month in September. Officials have suggested the 0.4% fee—a charge levied on merchants, not consumers—would not have a “major impact” on UPI usage.

The drop to 24.07 billion transactions in September marks the first decline since the fee took effect on October 15. While the stance aligns with fintech’s relief over the Supreme Court’s refusal to block the policy, the volume dip suggests early friction. Mobile retailers, who staged a one-day strike on October 2, argue the fee disproportionately burdens small merchants already operating on thin margins.

The MDR applies only to merchant payments above ₹2,000, leaving person-to-person transfers untouched. That distinction has kept the policy from becoming a broader political flashpoint, but the volume decline raises questions about whether the fee’s threshold—set just above the average ticket size for many small businesses—will discourage higher-value UPI transactions over time.

For now, the policy’s survival preserves fintech’s quiet win: a revenue stream that could bolster payment apps’ unit economics. But with volumes now trending downward, the next few months will test whether the policy’s design can sustain growth—or if the 2% dip is just the start.

Sources: yourstory.com