To make instant digital payments even more rewarding, the Indian government is considering a 2% automatic discount for consumers who choose to pay via UPI (Unified Payments Interface) instead of using credit cards.
What’s the Plan?
As per the proposed idea, UPI users would pay 2% less than those using credit cards, encouraging consumers to shift toward faster, zero-cost payment modes. While merchants usually pay a Merchant Discount Rate (MDR) of 2–3% on credit card payments, UPI transactions have been MDR-free since 2022, helping merchants save money, and consumers might benefit directly too.
Who’s Involved?
Before rolling out this benefit, the Ministry of Consumer Affairs will consult:
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E-commerce platforms
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Payment service providers
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NPCI (National Payments Corporation of India)
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Department of Financial Services
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Consumer rights groups
A final decision is expected after a stakeholder meeting next month.
💳 Credit Cards vs UPI: What’s the Difference?
| Feature | Credit Cards | UPI |
|---|---|---|
| MDR Charges | 2–3% on merchants | Zero (since 2022) |
| Processing Time | ~30 seconds | Soon to be 15 seconds |
| User Reward | Cashback/Points | Now possibly 2% off |
A Shift in Strategy
This plan would reverse the earlier trend where even UPI had a small MDR (less than 1%) before 2022. By scrapping it, the government helped make UPI the top payment method in India, but banks and service providers lost a key revenue stream. This discount could now re-route the benefit directly to the consumer.
UPI isn’t just cheaper—it’s also about to get faster. Starting June 16, NPCI will reduce UPI transaction time from 30 seconds to just 15 seconds, making it nearly real-time.
In FY25 alone:
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📈 185.85 billion UPI transactions
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💰 ₹260 trillion in total value
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📊 42% growth year-on-year
As credit card usage still accounts for over 50% of transactions at major retail outlets, this UPI discount could significantly alter payment trends across India. The upcoming tiered pricing system for credit cards (higher fees for big players, lower for smaller ones) also shows the government’s intent to make digital payments more inclusive and consumer-friendly.
Stay tuned for updates after the stakeholder consultation next month—and maybe hold off on swiping that card, just in case UPI becomes not only easier but cheaper too.
(inputs-paymentsjournal)
