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Will UPI purchases become cheaper than using credit cards? Here’s what we know
Credit cards have an associated merchant discount rate (MDR) of 2-3 per cent that either erodes merchant margins or gets indirectly transferred to customers.
Mumbai:
India’s Unified Payments Interface (UPI) continues to cement its position as the backbone of the country’s digital payment infrastructure. In the second half of 2024, UPI transaction volumes soared to 93.23 billion, reflecting a 42% year-on-year (YoY) growth, according to data from the National Payments Corporation of India (NPCI).
Now, in a move aimed at increasing UPI adoption even further, the government is reportedly considering steps to make UPI usage cheaper than credit cards.
Consumer Affairs Ministry Exploring Price Incentives for UPI
As reported by Livemint, the Consumer Affairs Ministry is working on a mechanism that would allow the cost benefits of UPI to be passed on directly to consumers.
If implemented, this could mean automatic price advantages for UPI users. For example, consumers might pay ₹98 via UPI for a product that would cost ₹100 via credit card, giving a direct monetary incentive to choose UPI over card payments.
UPI Transaction Volumes Surge; Government Plans to Make UPI Cheaper Than Credit Cards
Mumbai:
India’s Unified Payments Interface (UPI) continues to cement its position as the backbone of the country’s digital payment infrastructure. In the second half of 2024, UPI transaction volumes soared to 93.23 billion, reflecting a 42% year-on-year (YoY) growth, according to data from the National Payments Corporation of India (NPCI).
Now, in a move aimed at increasing UPI adoption even further, the government is reportedly considering steps to make UPI usage cheaper than credit cards.
Consumer Affairs Ministry Exploring Price Incentives for UPI
As reported by Livemint, the Consumer Affairs Ministry is working on a mechanism that would allow the cost benefits of UPI to be passed on directly to consumers.
If implemented, this could mean automatic price advantages for UPI users. For example, consumers might pay ₹98 via UPI for a product that would cost ₹100 via credit card, giving a direct monetary incentive to choose UPI over card payments.
Why UPI is Cheaper Than Credit Cards
Credit cards typically involve a merchant discount rate (MDR) of 2–3%, a fee borne by the merchant but often indirectly passed on to consumers through higher pricing. UPI, on the other hand, does not carry any MDR, making it a cost-effective and transparent payment method.
According to Shams Tabrej, CEO of Ezeepay:
“If the customer is provided with a clear price benefit for using UPI—for instance, paying ₹98 instead of ₹100—it could influence daily purchasing behaviour and improve transparency in retail pricing. With UPI transaction speeds expected to double by June 2025, this policy could make UPI an even more preferred payment mode.”
Policy Goals and Timeline
The overarching goal of this move is to boost the adoption of UPI and promote digital financial inclusion. The Consumer Affairs Ministry is expected to hold stakeholder consultations in June 2025, following which a final blueprint of the policy could be developed.
This initiative underscores India’s continued efforts to evolve into a cash-light economy, while offering cost-effective solutions for both merchants and consumers.