New Delhi, Sep 16 : The new Merchant Discount Rate (MDR) framework for UPI transactions will not impose any charges on customers and stated that the move is necessary to make India's digital payments ecosystem financially sustainable, PhonePe CEO Sameer Nigam said on Wednesday.
In an interview with IANS, he clarified that customers will continue to use UPI without any charges, Nigam said small merchants with an annual turnover of less than Rs 1 lakh will also remain outside the MDR regime.
"No, there are no fees for customers on UPI at all. Customers have never been charged for using UPI, nor will they be charged in the future," Nigam said.
For larger shops, 96 per cent of the transactions, which are all below Rs 2,000 transactions, there is no charge, according to him.
He added that merchants, and not customers, would pay a 0.4 per cent MDR on transactions above Rs 2,000.
He said the revenue generated through MDR would help fund investments by companies and banks that form the UPI ecosystem.
“The industry spends about Rs 10,000 crore to Rs 12,000 crore a year minimum on just keeping UPI infrastructure alive,” Nigam told IANS.
Apart from infrastructure, the sector incurs costs related to KYC, cybersecurity, risk and fraud mitigation, merchant chargebacks and capital expenditure, adds Nigam.
“We needed a way to get that revenue back into the industry so that UPI grows in a sustainable manner,” Nigam said.
Asked whether consumers should be concerned about charges, Nigam said there would be no additional cost for them, either for person-to-person or person-to-merchant transactions.
“There is no charge for the customer. Person-to-person is also free, person-to-merchant is also free,” he said, adding that merchants paying MDR would not be allowed to pass the charge on to customers.
Nigam also said he expected India's digital payments market to continue growing rapidly despite the introduction of the MDR framework.
According to Nigam, UPI had around 20 crore users by 2020, while the number has now risen to around 50-55 crore.
He said the new revenue model could also help private companies in the fintech sector invest more in marketing, innovation and research and development.
“It is very important that businesses be able to make fair money,” Nigam said.
UPI customers will never be charged, new MDR framework to fund ecosystem: PhonePe CEO
