Amid the ongoing debate over the introduction of a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions, the Payments Council of India (PCI) has called for a sustainable revenue model to support the long-term growth of India’s digital payments ecosystem. The industry body said continuous investments in cybersecurity, fraud prevention, technology infrastructure and innovation are essential to keep the country’s largest real-time payments network secure, resilient and future-ready. It stressed that its proposal is aimed at ensuring the financial sustainability of the ecosystem without imposing any burden on consumers or small merchants.
According to the PCI, India’s digital payments ecosystem has expanded at an unprecedented pace, with UPI now accounting for nearly 89 percent of all digital payment transactions in the country. The platform processes more than 23 billion transactions every month, with a total transaction value of nearly ₹30 lakh crore. Managing a payment network of this scale requires sustained investment in advanced technology, cybersecurity frameworks, regulatory compliance, customer support, fraud monitoring and continuous innovation. At present, these operational costs are largely borne by banks and payment service providers.
Merchant Discount Rate (MDR) is a fee paid by merchants to banks or payment service providers for processing digital transactions. UPI has operated under a zero MDR regime since 2020. However, following the recent passage of amendments to the payments law in the Lok Sabha, the government now has the legal authority to impose MDR on notified digital payment systems, including UPI, if considered necessary. The government has clarified that there is no immediate proposal to levy charges on consumers or small merchants.
The Payments Council of India said that over the past decade, the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI), banks, fintech companies and payment service providers have collectively built the world’s largest real-time digital payments network. During this period, significant investments have been made in strengthening cybersecurity, improving fraud detection capabilities and enhancing the reliability of the digital payments infrastructure. According to the council, maintaining and expanding these investments is critical as digital transaction volumes continue to grow rapidly.
The issue has also triggered political debate. Opposition leaders recently expressed concerns that introducing MDR could eventually increase the cost of digital payments for ordinary users. In response, Finance Minister Nirmala Sitharaman clarified that UPI transactions would remain free for consumers and small merchants. She stated that merchant service charges, wherever applicable, are commercial arrangements between merchants and payment service providers and should not be interpreted as fees payable by consumers using digital payment platforms.
Cybersecurity experts have also underlined the importance of sustained investment in protecting India’s rapidly expanding digital payments ecosystem. With phishing attacks, fake UPI applications, social engineering scams and online financial fraud becoming increasingly sophisticated, experts believe stronger security infrastructure is essential. Renowned cybercrime expert and former IPS officer Prof. Triveni Singh said that continuous investment in cybersecurity and fraud prevention is not merely a technological requirement but a critical factor in maintaining financial stability and public confidence in digital payment systems. He added that robust security mechanisms significantly reduce the risk of large-scale cyber-enabled financial crimes and strengthen trust in digital transactions.
The Payments Council of India further stated that as UPI continues to evolve into the world’s largest real-time payment network, discussions on a sustainable funding mechanism have become increasingly important. According to the council, any future framework should ensure that consumers and small merchants remain fully protected while enabling banks, fintech companies and payment service providers to continue investing in security, infrastructure and innovation. It maintained that a balanced approach would help preserve the reliability, resilience and global competitiveness of India’s digital payments ecosystem in the years ahead.
