83% of merchants unwilling to absorb new UPI-MDR charge: Survey
What's the story
A recent survey by LocalCircles has revealed that a whopping 83% of merchants are not ready to absorb the new Merchant Discount Rate (MDR) for Unified Payments Interface (UPI) transactions. The MDR, which is set to come into effect from October 15, will charge a fee of 0.4% on person-to-merchant UPI payments over ₹2,000. The survey covered over 32,000 businesses across India and found only 17% willing to bear this cost.
Forecast
Anticipated impact on UPI usage
The survey's findings indicate that the introduction of the 0.4% MDR could lead to a 10% decline in UPI transaction value and a 4% drop in transaction volumes.
This prediction is based on responses from consumers and merchants, as well as data from the National Payments Corporation of India (NPCI).
The organization conducted this study just days before the new MDR framework is set to come into effect.
Merchant response
Breakdown of merchant responses
Of those open to absorbing merchant discount rates (MDR), 15% capped their threshold at 0.04%.
Another 12% were willing to pay up to 1%, 8% up to 0.25%, and 5% each accepted limits of 0.1%, 0.2%, and 0.5%.
At the notified rate of 0.4%, an overwhelming majority of merchants surveyed (83%) said they wouldn't be willing to absorb the charge.
User reaction
Consumer preferences and alternatives
The survey also gaged consumer response to the potential MDR charge.
Out of over 67,000 responses from UPI users, only 14% said they would continue using UPI and bear the additional amount if a merchant charged an extra fee for payments above ₹2,000.
Cash emerged as the most preferred alternative, with 27% of respondents opting for it over other payment methods like credit cards (26%), debit cards (14%), bank transfer NEFT or IMPS (4%).
Implementation date
What's changing from October 15?
From October 15, a 0.4% MDR will be levied on person-to-merchant UPI payments over ₹2,000. This ends more than six and a half years of no MDR on UPI transactions.
However, the new framework doesn't apply to all UPI payments. Transactions up to ₹2,000 are still exempt from charges while person-to-person transfers remain free of cost.