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UPI users may receive instant discount on every purchase
19 May 2025

The Indian government is reportedly considering a new initiative to make Unified Payments Interface (UPI) transactions more appealing by offering direct discounts to consumers.

Currently, credit cards attract a merchant discount rate (MDR) of 2-3%, but UPI transactions don't attract such charges.

The government is said to be looking at ways to directly transfer these cost benefits of UPI payments to consumers.

How UPI transactions could become cheaper
Cost advantage

Currently, when a credit card is used for payment, the merchant pays an MDR of ₹2-3 for every ₹100 spent.

This cost is sometimes absorbed by merchants themselves, but can also be passed on to customers.

However, UPI allows merchants to retain the full amount of the transaction.

If this plan is implemented, UPI users could get an automatic price advantage, paying ₹98 for something that would cost ₹100 with a credit card.

Government's plan to promote UPI adoption
Stakeholder consultations

The government's initiative seeks to promote wider adoption of UPI by providing an upfront discount at the time of purchase.

This would essentially reward users for opting for this zero-fee digital payment mode.

The consumer affairs ministry is planning to consult stakeholders, including e-commerce platforms, payment service providers, National Payments Corporation of India (NPCI), Department of Financial Services (DFS), and consumer rights groups.

The final plan may be formulated after a stakeholder meeting scheduled for June.

UPI transactions to become faster
Speed increase

In other news, UPI transactions will be faster from June 16, 2025. A new NPCI mandate has directed a reduction in API response time for various financial and non-financial UPI activities.

This will bring down the transaction time from the current 30 seconds to just 15 seconds.

This comes as UPI maintains its dominance in India's digital payment landscape, recording a remarkable 185.85 billion transactions in FY25, a significant volume increase of about 42%, with total value reaching ₹260 trillion.