UPI MDR above ₹2,000: Survey finds 76% of consumers may shift to cards or cash if merchants pass on 0.4% fee

The proposed 0.4% Merchant Discount Rate (MDR) on UPI Person-to-Merchant (P2M) transactions above ₹2,000 is set to take effect from 15 October, with merchants liable to pay it.

While merchants have expressed concerns about bearing the charge, a new LocalCircles survey suggests consumers may also resist paying it if merchants pass the cost on to them.

The LocalCircles survey, which received over 67,000 responses from UPI users across 291 districts, found that most consumers would switch to another payment mode if an additional UPI fee is charged on transactions above ₹2,000.

What will consumers do if merchants add the UPI fee?

According to the survey, only 14% of respondents said they would continue paying through UPI and bear the additional amount if a merchant charged a fee.

Another 27% said they would pay in cash, while 26% would switch to a credit card. Around 14% would use a debit card and 4% would opt for bank transfer, NEFT or IMPS.

The survey also found that 9% would ask the merchant for another payment option without an additional charge, while 2% would avoid or delay the purchase. About 4% could not say what they would do.

Will consumers move away from UPI for larger payments?

The survey suggests the impact could extend beyond individual transactions. When asked which payment mode they would use most often for purchases above ₹2,000 if UPI carried an additional cost, 26% chose credit cards, and another 26% chose cash.

A further 13% said they would use debit cards, while 11% would opt for bank transfers, NEFT or IMPS. Only 20% said they would continue using UPI most often, while 4% were unsure.

“76% of UPI users surveyed expect to move their larger payments off UPI if it carries an extra cost,” LocalCircles noted.

The survey also indicates that cash could see a revival for higher-value purchases, with 26% of respondents saying they would most often use cash if UPI becomes chargeable. At the same time, credit and debit cards together could account for 39% of such payments.

Are merchants also unwilling to bear the MDR?

LocalCircles’ findings indicate resistance on both sides of the transaction. In a separate survey, involving more than 32,000 responses from businesses across 242 districts, only 17% of merchants said they were willing to bear a 0.4% MDR on UPI payments above ₹2,000.

Meanwhile, 41% said they would not bear any MDR, while another 9% said they did not accept UPI. The most common ceiling was 0.04%, selected by 15% of merchants, the survey found.

Disclaimer: This content is intended for informational purposes only and should not be considered financial advice.