UPI survey shows resistance to additional payment costs
A LocalCircles survey suggests that 76% of respondents could move purchases above ₹2,000 away from UPI if merchants charge them extra for using the payment method. The findings reflect a possible change in consumer behaviour, rather than an actual shift already recorded.
The survey comes ahead of a reported October 15 introduction of a 0.4% merchant discount rate, or MDR, on person-to-merchant UPI transactions exceeding ₹2,000. The scheduled change has also been reported by Reuters. MDR is a merchant-side payment processing fee; it should not be confused with an automatic charge payable by every UPI user.
According to the supplied report, the consumer survey received more than 67,000 responses across 291 districts. In a question about longer-term payment preferences, answered by 37,654 respondents, 26% chose credit cards and another 26% preferred cash if larger UPI payments involved an additional cost. Debit cards were selected by 13%, while 11% preferred bank transfers, NEFT or IMPS. Only 20% said UPI would remain their most-used option for such purchases, and 4% were undecided.
UPI users favour alternatives if merchants charge extra
A separate question, with 31,206 responses, examined what customers would do when a merchant requested an additional fee on a UPI payment above ₹2,000. Cash was the preferred alternative for 27% of respondents, followed by credit cards at 26% and debit cards at 14%. Another 4% selected bank transfers, while 9% would ask for a different payment option without an extra charge.
Only 14% said they would pay the additional amount and continue using UPI. Meanwhile, 2% would avoid or postpone the purchase, and 4% could not say. These responses show that willingness to pay extra remains limited among those surveyed. However, stated preferences do not establish how customers will behave at checkout or represent a guaranteed nationwide decline in UPI use.
UPI merchant concerns put focus on implementation
The supplied report says a separate LocalCircles business survey received more than 32,000 responses across 242 districts. Only 17% of respondents were willing to absorb a 0.4% MDR on UPI payments above ₹2,000, while 41% said they would not bear any MDR. At the stated rate, the processing fee would equal ₹20 on a ₹5,000 transaction and ₹200 on a ₹50,000 transaction, before any applicable tax on the fee. These examples describe the merchant’s processing cost, rather than an authorised customer surcharge.
According to the report, the government’s position is that merchants should not transfer the MDR to consumers. It also states that person-to-person transfers, merchant payments up to ₹2,000 and specified small merchants would remain exempt. The central issue is therefore whether customers continue to experience UPI as free at the point of payment. The survey indicates that additional charges—or uncertainty about them—could encourage respondents to choose cash, cards or bank transfers for larger purchases.
