The announcement of merchant charges on select Unified Payments Interface (UPI) payments is drawing a mixed response across businesses, with retailers warning of pressure on already thin margins and capital markets bracing for some near-term impact, even as quick-commerce and e-commerce firms expect little disruption.
The All India Consumer Products Distributors Federation (AICPDF) has flagged concerns over fees on select UPI transactions, warning that the charges could hurt retail trade at a time when small traders, retailers and distributors are under severe margin pressure.
The federation has urged the Centre and called for a zero-MDR mechanism to protect small retailers and micro, small and medium enterprises (MSMEs).
“AICPDF also believes that the threshold prescribed for small retailers under the zero-MDR framework should be substantially enhanced, keeping in view the significant growth in the scale of business even among small and petty retailers. The existing threshold does not adequately reflect the realities of today’s general trade and should be made more inclusive,” it said in a statement.
On Tuesday, the National Payments Corporation of India (NPCI) notified a 0.4 per cent MDR on person-to-merchant (P2M) transactions above Rs 2,000, with a cap of Rs 300.
Peer-to-peer transactions and transactions made to small vendors, known as the P2PM category, continue to remain free regardless of transaction size.
P2PM merchants are small vendors receiving up to Rs 1 lakh each month, benefiting merchants in rural and semi-urban areas.
Capital market transactions
Meanwhile, National Stock Exchange (NSE) managing director and chief executive officer Ashish Chauhan said the change in UPI MDR could affect trading volumes through the payment channel in the short term, although the impact is expected to stabilise over the longer term.
According to NPCI, a 0.02 per cent MDR has been finalised for capital market transactions, with a maximum cap of Rs 300.
This includes payments towards mutual funds, securities, stockbrokers and dealers. The rule also applies to equity buying, debt market investments, mutual fund purchases and broker wallet top-ups.
Q-comms bullish
For quick-commerce (qcom) and e-commerce (ecom) businesses, the development is unlikely to have a significant impact, said Satish Meena, founder of Datum Intelligence.
“The impact on qcom and ecom will not be as big because a dominant count of transactions, especially on qcom, are below Rs 600, and in case of bigger spends, people generally use non-UPI means like credit cards to get better discounts and cashbacks,” Meena said.
A person aware of the developments at qcom platforms said that, given the festive season in sight, companies will not pass on any additional cost to customers during this period.
“Companies will not take any measures during the festive season to disincentivise customers. There will be several customers who will transact on these platforms for the first time, and thus, the focus will be to offer the best prices to retain and acquire new customers.”
An executive at Zepto said that, on a monthly basis, the company records less than 5 per cent of total transactions above Rs 2,000. The person added that, given this small count, the development will not impact the company as significantly.
While queries emailed to Flipkart, Meesho, Nykaa, Zomato, Swiggy and Instamart did not elicit a response till the time of going to print, an Amazon spokesperson said that UPI’s success was built on zero-cost adoption by consumers, small shopkeepers and micro-enterprises, and that the notified MDR framework preserves that foundation.
“We are reassured that small-value transactions up to Rs 2,000, comprising over 95 per cent of UPI P2M volume, remain zero MDR, ensuring everyday payments stay free for consumers. A reasonable, proportionate MDR that keeps UPI accessible for everyday transactions while supporting long-term ecosystem sustainability is a welcome measure, and we look forward to working constructively with all stakeholders to ensure UPI’s growth trajectory continues uninterrupted,” said Girish Krishnan, director of payment experience at Amazon Pay.
