Search results for how does UPI payment work 2026 2026 in India in India explained 2026
- bbc.com › news › articles › c8xnwqe00v1oEN
India built a digital payments miracle. Now comes the bill. - BBC
Site search News Business Technology Travel Earth Audio Video Live # India built the world's biggest digital payments miracle. Now comes the bill 16 August 2026 Share Save For most Indians, paying by Unified Payments Interface (UPI) has become almost absurdly routine. Scan a QR code, tap a few buttons and the money moves instantly. There is no card machine, no cash, and - most importantly - for the user, no visible fee. India has [paved the way](https://thewire.in/banking/lok-sabha-passes-bill-allowing-govt-to-permit-banks-others-to-charge-for-upi-transactions) for banks and payment companies to charge merchants a fee on UPI transactions, potentially ending a decade-long experiment in free digital payments. The government has yet to decide the rate or exactly where it will apply, but proposals under discussion include a merchant discount rate (MDR) of 0.3-0.5% - a small fee paid by a business to the banks and payment companies that process its UPI payments - on larger transactions at big businesses. The government [says](https://www.pib.gov.in/PressReleasePage.aspx?PRID=2296594®=48&lang=2) consumers and person-to-person UPI payments will remain free. If merchant fees are introduced, they will apply only to some transactions above a set threshold, at a nominal rate, meaning most UPI payments will remain free. A man stands beside a horse fitted with a payments QR code near its eye, allowing riders to pay digitally after a beach ride According to official data, in July alone, there were 23.6 billion UPI transactions worth 29.87 trillion rupees ($313.5bn; £232.2bn). Fintech apps such as PhonePe and Google Pay account for most UPI payments. In the financial year just ended, the figure was about 241.6 billion transactions - almost 12,000 times the volume in UPI's first full year. More than [550 million people now use it](https://www.pib.gov.in/PressReleasePage.aspx?PRID=2286608®=48&lang=2), and the system is now available in some form for payments in 11 countries outside India. UPI is not merely big. Its design is unusual. The system is run by the National Payments Corporation of India, a non-profit entity, with banks and technology companies providing the consumer-facing services. A vegetable seller, taxi driver or small shopkeeper does not need to buy a card terminal to accept UPI. A printed QR code will do. And because merchants have not had to pay MDR, there has been little financial reason to turn customers away. A woman scans a QR code after buying vegetables at a market in Kolkata It helped drive it. "Our study suggests that merchant acceptance is not just a result of UPI growth, but one of its key drivers," Motheram says. Districts with stronger merchant networks tended to see higher UPI adoption. "If charges are limited to large merchants or higher-value transactions, the effect on broad-based adoption may be modest. But if they reach small and informal merchants, especially in districts where acceptance networks are still developing, they could slow the merchant expansion that has helped UPI scale," he says. One option reportedly under discussion would target transactions above 2,000 rupees at larger merchants, leaving small businesses and low-value payments untouched. Transactions above that threshold account for only about 4% of merchant-payment volumes but roughly 67% of their value, according to brokerage firm Jefferies. That could generate a sizeable new revenue stream - up to a billion dollars, by one [estimate](https://x.com/refsrc/status/2084486790405345404?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E2084486790405345404%7Ctwgr%5E76a20d07d91e080db36c073d97839e992897e0cf%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.medianama.com%2F2026%2F08%2F223-rbi-governor-upi-mdr-premature%2F) - for banks and payment companies while leaving the everyday smaller payment to the neighbourhood grocer effectively unchanged. UPI may feel free, but it is not costless. Even street food vendors accept digitial payments in India Servers have to run, transactions settled, fraud detected and the system protected against cyberattacks. For years, the government has helped compensate banks and payment firms for providing a service that has effectively been treated as public infrastructure. As Sanjay Malhotra, governor of the Reserve Bank of India (RBI), the country's central bank, recently put it: "Someone will have to pay the cost." But the economics become trickier the further down the merchant chain a fee travels. Motheram's research does not estimate precisely how sensitive merchants are to MDR. But it offers a warning against assuming that a small fee will have a small effect. "Even a small fee could matter if it changes the incentives of small merchants operating on thin margins," he says. The effect, he argues, depends heavily on the design of the charge. A fee imposed on a large retailer is very different from one imposed on a tiny shop or informal trader. That distinction matters because UPI's extraordinary growth was not simply a story about Indians getting smartphones. "If charges are limited to large merchants or high-value transactions, the risk to mass adoption is likely lower," Motheram says. It wants to make UPI financially sustainable without disturbing the conditions that helped make it ubiquitous. It is not an impossible task. Yet it is the world's [fastest-growing real-time payment system,](https://www.rebill.com/en/blog/pix-your-ticket-to-the-brazilian-market) used by more than 140 million people and 14 million companies, with more than four billion transactions a month averaging about $88 each. That may be the real test of India's next UPI experiment. The first phase was about creating the network. The second was about getting hundreds of millions of people and millions of merchants onto it. The third is now beginning: figuring out how to pay for the system without making it less useful. Economist Renuka Sane believes the right pricing structure could finally restore ["commercial sanity"](https://theprint.in/opinion/free-upi-was-a-policy-success-and-an-economic-distortion/3011394/) to India's digital payment rails, allowing the market to price risk, fund critical infrastructure and build a more resilient payments ecosystem. The bigger risk may not be that Indians suddenly abandon UPI because a large retailer is charged a fraction of a percentage point: experts say its network effects are now too powerful for that. The risk is subtler. If charging merchants makes some of them less enthusiastic about accepting UPI - or eventually discourages the smallest ones from joining - the network could begin to lose some of the frictionless quality that made it so successful. [India](https://www.bbc.com/news/world/asia/india)
- blog.orbitremit.com › what-is-upi-india-guideEN
What Is UPI? India's Real-Time Payment System Explained
UPI stands for Unified Payments Interface — a real-time payment system developed by the National Payments Corporation of India (NPCI) and ...
- facebook.com › finservmarkets › videos › upi-charges-in-2026-before-the-rumours-take-over-heres-whats-actually-changing-fEN
UPI charges in 2026? Before the rumours take over, here's ...
This video from Bajaj Markets provides an educational overview of the changes to the UPI payment system in 2026. The speaker explains that UPI ...
- reuters.com › world › india › indias-upi-fee-shake-up-what-changes-why-it-matters-2026-09-16EN
India's UPI fee shake-up: What changes and why it matters
[Skip to main content](https://www.reuters.com/world/india/indias-upi-fee-shake-up-what-changes-why-it-matters-2026-09-16/#main-content) MUMBAI, Sept 16 (Reuters) - Using mobile phones to scan a QR code for payments has become near ubiquitous behaviour in India over the last decade, thanks to a widely used homegrown network, the Unified Payments Interface (UPI). But after six years of free use, regardless of size or type of payment, India has decided [to start charging](https://www.reuters.com/world/india/india-payments-authority-sets-04-fee-upi-merchant-payments-above-2000-rupees-2026-09-15/) merchants a fee of 0.4% for transactions of more than 2,000 rupees ($21), known as the Merchant Discount Rate (MDR), with some exclusions, though person-to-person transfers remain free. Sign up [here.](https://www.reuters.com/newsletters/reuters-india-file/?location=article-paragraph&redirectUrl=%2Fworld%2Findia%2Findias-upi-fee-shake-up-what-changes-why-it-matters-2026-09-16%2F) Shares of Indian payment firms [rose](https://www.reuters.com/world/india/indias-payment-firms-jump-upi-fee-boosts-revenue-outlook-2026-09-16/) on Wednesday as investors saw the MDR opening fresh revenue lines for banks and payment firms that have so far absorbed the costs of such transactions. ## HOW BIG IS UPI? In August, UPI processed a total of 24.5 billion transactions worth 29,823 billion rupees for more than 550 million users, official data show. UPI has a share of 84% in India's digital payments by volume and a 49% share of global real-time payment volumes, the government said on Tuesday. Walmart's PhonePe and Alphabet's GooglePay had about 80% market share by value of UPI transactions in August. ## WAS UPI ALWAYS FREE? Its pricing model at launch in 2016 included nominal charges temporarily waived in 2017 when India demonetised a large chunk of its high-denomination currency notes. Advertisement · Scroll to continue In 2020, all charges were scrapped, kicking off a zero-MDR regime set to end on October 15, 2026. ## WHAT FEE WILL BE IMPOSED? A fee of 40 basis points applies to transactions above 2,000 rupees with merchants, along with carve-outs for payments to small merchants and those operating in rural or semi-urban areas. Widely used categories such as telecom, railways and mutual fund or stock investments will attract lower charges. Fees are capped at 300 rupees on transactions exceeding 75,000 rupees. ## WHAT CRITICISM DOES IT FACE? India's opposition party, Congress, has criticised the government's decision, with opposition leader Rahul Gandhi saying the fees will swell the burden for consumers as merchants pass on the cost. ## WHY DOES UPI NEED THE MERCHANT DISCOUNT RATE? India's government, the central bank and payments authority say, the MDR will help make UPI self-sustainable, give a fillip to expansion in rural and semi-urban areas, and keep a large majority of payments free of charge. ($1=95.9275 rupees) Advertisement · Scroll to continue Reporting by Jaspreet Kalra; Editing by Clarence Fernandez Our Standards: [The Thomson Reuters Trust Principles., opens new tab](https://www.thomsonreuters.com/en/about-us/trust-principles.html) - X - Facebook - Linkedin - Email - Link [Purchase Licensing Rights](https://www.reutersagency.com/en/licensereuterscontent/?utm_medium=rcom-article-media&utm_campaign=rcom-rcp-lead)
- facebook.com › Persistclasses › posts › upi-has-become-a-part-of-our-everyday-lifefrom-paying-at-local-shops-to-sending-EN
India's new UPI rules 2026 and transaction limits - Facebook
From transaction limits and stricter KYC checks to increased monitoring of high-value UPI activity, the system is getting tighter. What this ...
- digitalinasia.com › india-digital-payments-revolution-2026EN
India's Digital Payments 2026: Inside the UPI System
[Skip to content](https://digitalinasia.com/india-digital-payments-revolution-2026/#content)  This is not incremental progress. It is a civilizational-scale experiment — and by every measurable indicator, it is working. Here are the seven findings that matter most. ## 1. [UPI](https://digitalinasia.com/?p=10626) Now Processes Half the World’s Real-Time Payments That single-country payment network now accounts for approximately 50% of all real-time digital payment volume globally — a share no other payment system in any country has come close to matching. For context: global e-commerce was approximately USD 6 trillion in 2024. [UPI](https://digitalinasia.com/?p=10626)’s annual transaction value is already more than half that figure. UPI is projected to reach 1 billion transactions per day by FY2028. ## 2. The Payments Business Generates Almost No Revenue — and That Is the Entire Opportunity India’s zero-MDR (merchant discount rate) policy means the largest payment network in the world generates virtually nothing for its participants. The government subsidizes processors to the tune of INR 1,500 crore annually in lieu of fees. The industry estimates that a 0.1% MDR on UPI’s FY2025 value would generate USD 3.1 billion in annual revenue — revenue that currently does not exist. This constraint has created an intense race to monetize payment relationships through adjacent products. PhonePe’s financial services revenue — insurance and lending — grew 206% year-over-year in FY2025. The companies that convert payment users into multi-product financial services customers will capture the bulk of Indian [fintech](https://digitalinasia.com/rising-stars-the-emerging-giants-of-asia-pacifics-tech-scene/)’s next decade of value. ## 3. India Has a USD 291 Billion Credit Blind Spot Fintechs have captured 47% market share in unsecured personal loans and 73% of loans below INR 100,000. Yet India’s MSME credit gap alone stands at INR 25 trillion (USD 291 billion). Credit card penetration sits below 8% of the adult population. This is the mechanism that unlocks credit for the 700 million adults previously invisible to formal lenders. ## 4. Insurance and Wealth Penetration Are Structurally Broken — and That Is Structurally Investable India’s insurance penetration sits at 3.7% of GDP — exactly half the global average of 7.3%. Per-capita insurance spend is USD 97 versus a global average of USD 943. ## The Bigger Picture India in 2026 is not a single fintech market. Payments are commoditized. It does. ### Leave a Comment [Cancel reply](https://digitalinasia.com/india-digital-payments-revolution-2026/#respond) Notify me of new posts by email.
- caclubindia.com › articles › new-upi-rules-starting-from-15th-october-2026-complete-fee-structure-for-transactions-56345.aspEN
New UPI Rules 2026: Merchant Fees & Consumer Impact
# New UPI Rules Starting From 15th October 2026: Complete Fee Structure for Transactions Chaitra Seetharam  Follow [View profile](https://www.caclubindia.com/profile.asp?member_id=4108872) Quick Summary From 15 October 2026, new UPI rules will introduce charges for certain merchant payments in India. While everyday UPI transfers and payments up to ₹2,000 will remain free for consumers, a revised Merchant Discount Rate (MDR) framework will apply to person-to-merchant (P2M) transactions exceeding ₹2,000. Eligible merchants will bear a 0.4% MDR, capped at ₹300 per transaction, with specific rates for sectors like railways, telecom, and capital markets. Importantly, these charges are borne by the merchant, not the consumer, and person-to-person transfers remain free. ## Introduction #### Looking for a specific UPI rule? Tap below to jump straight to it.” Under the new rules, eligible merchants will bear a 0.4% MDR on such payments, subject to a cap of ₹300 per transaction. Certain sectors, including railways, telecom, insurance, fuel, and agricultural inputs, will attract a flat ₹5 charge, while capital-market transactions will attract a lower 0.02% MDR. Importantly, consumers will not be charged separately for using UPI, and person-to-person transfers will continue to remain free. This article explains the new UPI rules effective from 15 October 2026, who will pay the charges, which transactions are affected, and what the changes mean for both consumers and merchants. ## FAQs ### Go AD-FREE with CAclubindia Pro Membership - Daily E-Newsletter on GST, Income Tax, Finance & more - 5% Off on Professional Courses #### [Chaitra Seetharam](https://www.caclubindia.com/profile.asp?member_id=4108872)  Worth mentioning that RuPay debit card transactions are free without limit. No MDR on it. 07 October 2026The original Its just a trail to see the public reaction. 06 October 2026K. R. The UPI charges will impair the popularity and ease of doing business. It is said that is for the development of infrastructure and maintenance of UPI. No authority defines or explained them including the ... 06 October 2026Venkatram Srinivasan Do if the broken up in amounts of less than 2000 then there is no problem of mdr 06 October 2026Rodney Not to worry, this is only the beginning slowly the tentacles will start choking consumers, that's for sure. 05 October 2026[Sanjay](https://www.caclubindia.com/profile.asp?member_id=555062) So, merchants will pay for P2M transactions over £2000, not us? ##### Leave a Comment (Subject to moderation) Your email will never be published. ### Browse by Category - [Income Tax](https://www.caclubindia.com/articles/browse.asp?cat_id=3) - [GST](https://www.caclubindia.com/articles/browse.asp?cat_id=54)
- insightsonindia.com › 2026 › 09 › 01EN
The Unified Payments Interface (UPI) - INSIGHTS IAS
UPI is an advanced, real-time interoperable payment system that enables instantaneous inter-bank fund transfers directly through mobile ...
- youtube.com › watchEN
UPI Transaction New Rules Explained | What is MDR? - YouTube
What are the new UPI transaction rules for 2026, and why are these changes important for digital payments in India? How will the latest UPI ...
- m.economictimes.com › news › economy › policyEN
India's UPI miracle has a money problem; can Budget 2026 fix it?
UPI now accounts for roughly 85% of all digital payments by volume in the country, powered by deepening penetration into tier-2 and tier-3 towns ...