Fee on UPI transactions: Will your payments get costlier? What consumers need to know

Some smaller merchants, though, may pass on at least part of the burden to customers, if not the full burden, executives said.

MUMBAI: Will the reintroduction of MDR on select UPI transactions impact you in any way? Well, a lot will depend on individual retailers, even though the government has kept consumers beyond the ambit of the framework.

MDR is charged to merchants by banks and payment networks for processing digital transactions.Many of the large merchants such as big retail chains and restaurants are likely to absorb the cost in a competitive market instead of passing it on to consumers, industry executives said. Their margins, however, will get impacted and that too at a time when profitability is already under pressure on the back of considerable commodity inflation.“Large retailers can afford to bear the cost and the overall business impact for them should not be much. Credit cards always carried a charge. It will weigh on bottom-lines though,” said an executive with a top electronics retailer.

What experts said about the introduction of 0.4% MDR on UPI transactions

Some smaller merchants, though, may pass on at least part of the burden to customers, if not the full burden, executives said.“Small merchants will now think if they should accept cash or UPI,” said Kumar Rajagopalan, executive director & CEO at Retailers Association of India (RAI).

The government has said that small merchants receiving up to Rs 1 lakh per month through UPI QR codes under the person-to-person-merchant (P2PM) category will continue to enjoy zero MDR on all transactions. But several kirana stores, more so those operating out of metros and major cities across the country, easily make more than Rs 1 lakh per month through UPI payments.Close to 60% of payments made at kirana stores currently are processed through UPI, said Dhairyashil Patil, president, All India Consumer Products Distributors Federation (AICPDF).For smaller merchants, the other option could be to split payments of over Rs 2,000 into a few separate transactions to avoid payment of MDR, pushing up overall UPI volumes, said Parijat Garg, independent fintech analyst.“Largely, it is a positive move and we don’t expect any dip in volumes as such. The challenge will be enforcement as the universe of merchants and retailers in UPI is much higher than in cards,” said Garg.For instance, small merchants can create multiple IDs, making it difficult for regulators to keep track of payments, Garg added.“Any money pinches but for us, there won’t be a major impact unless the volume of payments made through UPI goes up. Currently, a major chunk of our customers are credit-card oriented and annual transactions made through UPI amounts to about Rs 7-8 crore for us. We won’t pass on to consumers,” said Anjan Chatterjee, founder at Speciality Restaurants, which owns brands Oh! Calcutta and Mainland China.