UPI MDR: 83% Merchants Unwilling to Absorb 0.4% Fee
A LocalCircles survey suggests most merchants may pass on the new UPI MDR or encourage alternative payment methods, while 76% of surveyed users may shift away from UPI for payments above Rs 2,000.
A LocalCircles survey has found that 83% of merchants are unwilling to absorb the 0.4% Merchant Discount Rate (MDR) set to apply to UPI payments above Rs 2,000 from October 15.
Among more than 32,000 businesses surveyed across 242 districts, only 17% said they would absorb an MDR of 0.4% or more. Another 41% said they would not bear any MDR.
The survey also points to a possible shift among consumers if merchants pass the cost on. Of more than 67,000 UPI users surveyed across 291 districts, just 14% said they would continue using UPI and pay an additional charge. Cash was preferred by 27%, while 26% chose credit cards and 14% debit cards.
LocalCircles estimates UPI transaction value could decline by around 10% and volumes by 4% after the MDR takes effect. Payments above Rs 2,000 account for less than 5% of merchant transactions by volume but around 67% of their value.
The government has said consumers should not be charged MDR and that banks must ensure merchants do not pass it on. However, the survey highlights concerns about how that rule will work in practice.
For UPI users, the era of “just scan and pay” may be getting a slightly more complicated footnote.
