Good News for UPI Users: Government May Offer Discounts on UPI Payments Soon

Consumer Affairs Ministry explores mechanism to make UPI payments cheaper than credit cards

In a move that could directly reduce the cost of purchases for consumers, the Consumer Affairs Ministry is reportedly exploring a proposal to pass on the cost-saving benefits of UPI payments directly to end users. If implemented, this could make UPI-based transactions cheaper than credit card payments, offering instant discounts at the point of sale.

Currently, credit cards attract a merchant discount rate (MDR) of 2-3%, which either cuts into the merchant’s profit margin or is passed on to customers, indirectly making purchases more expensive. In contrast, UPI payments are MDR-free, meaning merchants receive the entire transaction amount.

Potential for Automatic Price Advantage

According to the proposal under consideration, consumers paying via UPI could receive a direct price cut. For instance, an item costing ₹100 on a credit card could cost only ₹98 via UPI, thanks to eliminated MDR overheads.

The objective is to encourage wider adoption of UPI by offering an upfront reward to consumers who choose this zero-fee digital payment mode.

Stakeholder Consultation Expected in June

The ministry is expected to hold consultations with key stakeholders including:

• E-commerce platforms
• Payment service providers
• The National Payments Corporation of India (NPCI)
• The Department of Financial Services (DFS)
• Consumer rights organizations

A final framework could be developed following a stakeholder meeting anticipated in June.

Resistance from Some Players

Despite UPI’s meteoric rise, not all stakeholders are aligned. The Payments Council of India has consistently advocated for reintroducing MDR on UPI and RuPay debit cards, a move that has been rejected by the government so far.

Meanwhile, technical enhancements are also on the horizon. From June 16, 2025, UPI transactions are expected to complete in just 15 seconds, down from the current 30 seconds, following an NPCI mandate to reduce API response time for both financial and non-financial transactions.

UPI’s Unstoppable Growth

India’s Unified Payments Interface (UPI) has cemented its position as the most preferred digital payment platform. In FY25, it clocked a staggering 185.85 billion transactions, marking a 42% year-on-year increase in volume. The total value of these transactions stood at ₹260.56 trillion, up 30% YoY.

During the second half of 2024 alone, UPI transaction volumes surged to 93.23 billion, showcasing its dominance over traditional payment methods, including credit cards.

What This Means for You

If the new proposal is implemented:

• Your purchases may become cheaper when paid via UPI
• You’ll enjoy faster UPI transactions from mid-June 2025
• The shift could further reduce dependence on credit cards

Consumers are advised to watch for official announcements post the June stakeholder meeting for further clarity.