Opinion: UPI Did Not Kill the Tollbooth, It Moved It

Aditya Vikram Kashyap

UPI's real achievement is not that it made one layer nearly free. It is that it made the location, ownership and legitimacy of the tollbooth contestable

A tea seller outside Churchgate station takes Rs 20 for a cutting chai. The customer scans a QR code, the phone buzzes, the money arrives.

The interesting fact about this transaction is not that it is digital. It is that nobody in it pays a visible transaction fee at the point of sale, and almost nobody asks who owns the rail underneath or what that rail is permitted to charge. For most of modern payments history, the answer was settled: someone always charged, and the price was set upstream, by someone else.

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On August 8, 2026, India’s Ministry of Finance issued an unusual press release. It said that UPI stays free for consumers and person-to-person transfers, while conceding that any future merchant fee would be nominal, threshold-based and limited to a small class of transactions, because “reliance on subsidies alone is not viable for the next wave of growth."

The chronology is the tell. The Taxation and Other Laws (Amendment) Bill, 2026 passed the Lok Sabha on August 6; the reassurance arrived on the 8th, mid-argument; days later the Rajya Sabha considered the legislation, completing its passage; presidential assent was still awaited as this went to press.

The amendment is narrow. Since January 2020, Section 10A of the Payment and Settlement Systems Act, read with Section 269SU of the Income-tax Act, has barred charges on the prescribed modes, including UPI and RuPay debit; other cards kept their fees. The new text lets the central government notify which modes keep that statutory protection. No fee exists; the finance minister told the Rajya Sabha the provision is enabling, and any MDR would be weighed by an NPCI-led committee that has decided nothing. What changed is quieter: the perimeter of the prohibition became adjustable.

The reassurance and the amendment, read together, are the argument India has started with the global payments industry: not about technology, but about rent, and who sets it.

Start with how the incumbent system earns. When a card is used, the merchant gives up a slice of the sale, the merchant discount rate, sized by country and card type; India caps debit MDR at 0.9 per cent while credit rates are market-set and higher. The largest portion of that slice, interchange, does not go to Visa or Mastercard at all. It goes to the bank that issued the card, where it can help fund rewards, credit risk and fraud losses. The acquiring bank and the processor keep a margin.

The networks earn separately: service fees on payment volume, data-processing fees per transaction, and fees associated with cross-border payments. In the fiscal year to September 2025, Visa reported $40 billion of net revenue and $20.1 billion of net income on 257.5 billion processed transactions; Mastercard’s calendar-2025 net revenue was $32.8 billion. None of this is villainy. The fees fund chargebacks, dispute rights, global acceptance and fraud-prevention infrastructure. But notice the design: the movement of money is itself a profit pool, its price commercially set within........

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