India’s next UPI debate should not be reduced to a simple question: should digital payments remain free? The more consequential question is whether a system built as public digital infrastructure can acquire a sustainable economic model without damaging the extraordinary network it has created. The proposed merchant discount rate on UPI transactions above Rs 2,000 is therefore more than a technical change in payment economics. Properly designed, it could mark the beginning of a sensible transition from state-supported expansion to long-term sustainability.

Poorly designed, it could weaken one of the most successful pieces of India’s digital infrastructure. The case for charging is straightforward. UPI is not costless merely because the customer sees no charge. Banks, payment companies and the National Payments Corporation of India have to maintain technology, settlement systems, cybersecurity and fraud controls on a gigantic scale. Government support has helped sustain this ecosystem. But permanent subsidy is difficult to justify once a payment network has become indispensable to commerce.

The real danger lies elsewhere. UPI’s success was built partly on an unusually powerful........

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