Payments Council rules out consumer MDR on UPI, backs merchant-only charges

What PCI clarified

According to Inc42, the Payments Council of India (PCI) stated that UPI transactions will remain free for consumers. Small merchants will also continue to be protected from MDR charges.

The clarification follows the government’s move to enable MDR on select business UPI transactions. This aims to address concerns about creating a sustainable funding model for India’s digital payments ecosystem.

Industry support for merchant-only MDR

PhonePe, Razorpay, and Pine Labs have backed a merchant-only MDR framework. They argue it is necessary to fund investments in payments infrastructure, security, and innovation.

The finance ministry reinforced that person-to-person (P2P) UPI transactions will continue to remain free, addressing concerns about potential consumer charges.

Why this matters for startups

The shift toward merchant-only MDR could reshape cost structures for payment service providers and fintech startups. Founders may need to reassess pricing strategies and investment priorities in infrastructure and security.

This development reflects broader efforts to balance affordability for consumers with sustainability for the digital payments ecosystem.

What this means

Lazyfounder analysis — our interpretation, not reported fact.

This clarification from the PCI and the push for merchant-only MDR signals a critical juncture for India’s digital payments ecosystem. For founders and operators, it means preparing for potential cost shifts that could impact pricing models, customer acquisition strategies, and investment in technology. The move also underscores the need for sustainable revenue models in a space where consumer expectations of free services have been the norm. However, the exclusion of P2P transactions from MDR ensures that consumer adoption of UPI remains unhindered, which is a positive for companies leveraging digital payments for growth.

Key takeaways

• Founders and operators in the digital payments space must prepare for potential cost shifts as MDR may apply to select business UPI transactions.
• This development signals a push toward sustainability in India’s digital payments ecosystem, which could impact pricing strategies for payment service providers.
• The merchant-only MDR framework could change how payment gateways and fintech startups structure their fees and investments in infrastructure.