MUMBAI: A new merchant discount rate (MDR) on certain UPI payments above Rs 2,000 could prompt users to shift towards cash, credit cards or bank transfers if merchants pass the cost on to customers, as per media reports.
According to a LocalCircles survey, only 14% of UPI users said they would continue using UPI and bear an additional charge for payments above Rs 2,000. The survey received more than 67,000 responses from users across 291 districts.
The survey found that 27% of respondents would switch to cash, 26% to credit cards and 14% to debit cards. Another 4% said they would use bank transfers, while 9% would seek another payment option without an additional charge.
In a separate question, 76% of respondents said they would move larger payments away from UPI if an additional cost was imposed.
As per media reports, a 0.4% MDR is scheduled to apply from Oct. 15 to eligible person-to-merchant UPI payments above Rs 2,000. Payments up to Rs 2,000 and person-to-person transfers will remain outside the charge.
The government has said the MDR is a merchant-side fee and should not be passed on to consumers.
The survey also found that only 17% of merchants were willing to absorb the 0.4% MDR, while 41% said they would not bear the cost.
The development could test consumer and merchant behaviour around larger UPI transactions.
