Sunny Khurma
Cheif Editor
New Delhi, September 30, 2026: India’s Unified Payments Interface, or UPI, continues to expand at a remarkable pace, strengthening its position at the centre of the country’s digital economy as a new merchant fee framework prepares to come into effect.
UPI has emerged as the world’s largest real-time retail payment system by transaction volume and has transformed the way Indians make everyday payments. From small purchases at local shops to online transactions and money transfers, the system has become deeply integrated into daily commerce.
The scale of UPI has continued to grow rapidly in 2026. During August alone, the platform processed more than 24.5 billion transactions, with the total value of payments reaching approximately ₹29.82 lakh crore.
The continued rise reflects the increasing preference for instant digital payments across cities, towns and rural areas. UPI now accounts for a major share of India’s digital transactions and is used by hundreds of millions of people.
A significant change to the UPI payment model is scheduled to take effect from October 15, 2026, when a Merchant Discount Rate, commonly known as MDR, will apply to certain merchant transactions above ₹2,000.
Under the new framework, the charge will apply only to specified person-to-merchant payments. Ordinary users making UPI payments will not be directly charged for using the service.
Person-to-person transfers will continue to remain free irrespective of the amount being transferred.
Merchant payments of up to ₹2,000 will also continue without the new MDR, while eligible small merchants covered by the zero-charge framework will remain protected.
As a result, approximately 96% of person-to-merchant UPI transactions are expected to remain unaffected by the new fee structure.
The MDR has been set at a nominal level for qualifying high-value merchant transactions. The money collected will be distributed across participants in the digital payment ecosystem rather than being collected as a government tax.
The purpose of introducing a limited merchant fee is to create a sustainable revenue model for the rapidly expanding payment network.
Operating a system handling billions of transactions every month requires continuous investment in servers, cybersecurity, fraud prevention, network capacity, payment technology and system reliability.
For years, UPI’s rapid expansion has largely been supported through a zero-MDR model. While this helped accelerate digital payment adoption, the enormous growth in transaction volumes has also increased the cost of maintaining and expanding the infrastructure.
The new framework is designed to provide payment service providers and participating institutions with additional resources to invest in technology and strengthen the system as transaction volumes continue to rise.
India’s digital payment story has expanded dramatically over the past decade. UPI processed around 24,162 crore transactions worth more than ₹314 lakh crore during the 2025-26 financial year, highlighting how quickly digital payments have become part of everyday economic activity.
UPI accounted for roughly 84% of India’s digital payment transactions in FY 2025-26, demonstrating its dominance in the country’s rapidly evolving payment ecosystem.
Its international footprint has also expanded, with UPI acceptance now available in several countries and efforts continuing to develop cross-border payment connections.
The introduction of merchant charges for a limited category of high-value transactions therefore represents a new phase in UPI’s development.
While the system remains free for consumers and most merchants, the new revenue mechanism is expected to support greater investment in infrastructure, innovation, cybersecurity and long-term payment network resilience.
The success of the framework will ultimately depend on maintaining the affordability and simplicity that made UPI popular while ensuring that the technology supporting billions of transactions remains financially sustainable.
With transaction volumes continuing to set new records, UPI is moving from its initial phase of rapid adoption into a more mature stage focused on scale, reliability and long-term sustainability.
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