Paying by Unified Payments Interface (UPI) has become ubiquitous in India and almost absurdly routine. Scan a QR code, tap a few buttons and the money moves instantly. There is no card machine, no cash, and - most importantly - for the user, no visible fee. That may be about to change as National payment corporation of India (NPCI) has paved the way  for banks and payment companies to charge merchants a fee on UPI transactions above rupees 2000 from October 15, potentially ending a decade-long experiment in free digital payments. The government on September 15 announced the merchant discount rate (MDR) regime for UPI transactions. This came a day after it issued a notification barring banks and payment system providers from charging any fee on UPI transactions up to Rs 2000, while leaving payments above that threshold outside the exemption. This means MDR will be levied on payments to merchants on transaction amounts of over Rs 2,000 at a rate of 0.4%, with a few exceptions.

In August, UPI processed a total of 24.5 billion transactions worth 29,823 billion rupees for more than 550 million users, official data show. UPI has a share of 84% in India's digital payments by volume and a 49% share of global real-time payment volumes, the government said on Tuesday. Walmart's PhonePe and Alphabet's GooglePay had about 80% market share by value of UPI transactions in August. Its pricing model at launch in 2016 included nominal charges temporarily waived in 2017 when India demonetised a large chunk of its high-denomination currency notes. In 2020, all charges were scrapped, kicking off a zero-MDR regime set to end on........

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