What can Asia, Global South learn from India’s new digital payment fee?

For millions of Indians, buying a cup of chai or groceries from roadside vendors has come to mean reaching for their phones rather than wallets – a habit made possible by a system that has so far charged consumers nothing for such everyday transactions.

Now, a decade after the government launched the Unified Payments Interface (UPI), India is asking some merchants to pay for the hugely popular system – raising questions over whether it can preserve the low-cost model that drove its mass adoption while generating enough revenue to fund its own growth.

Under a new framework, a 0.4 per cent merchant discount rate – a processing fee merchants pay to banks and payment apps when they accept a digital payment from a customer – will apply to transactions above 2,000 rupees (US$21) starting from October 15. The charge has been capped at 300 rupees.

Experts say the roll-out will be crucial in determining whether the system can generate enough revenue to pay for its own maintenance and expansion.