UPI incentive cut worries industry again; calls for MDR grow louder

A cut in incentives for promotion of low-value transactions on the Unified Payments Interface (UPI) has raised concerns in the fintech industry, leading to calls for either introducing a merchant discount rate (MDR) on the real-time payments system or expanding the incentive outlay in the next financial year.

- AJINKYA KAWALE

Industry's concerns surfaced after the government approved ₹1,500 crore in a scheme for the promotion of low-value BHIM-UPI transactions when made from peers to merchants. This was a substantial cut from the ₹3,268 crore approved in 2023-24 (FY24). "There is still confusion about the latest incentive structure for small and large merchants. Will the structure be uniformly applicable to both offline and online merchants, where spending patterns differ?" a fintech executive of a third-party payments company asked, requesting anonymity.