UPI transactions may fall 4% in volume, 10% in value after MDR rollout: Survey

LocalCircles CEO Sachin Taparia said UPI transaction volumes could drop by around 4 per cent, while the monthly value of transactions may decline by nearly 10 per cent after the introduction of the charge.

Unified Payments Interface (UPI) transactions could see a decline in both volume and value once the proposed merchant discount rate (MDR) on high-value merchant payments comes into effect from October 15, according to estimates by community platform LocalCircles.

LocalCircles CEO Sachin Taparia said UPI transaction volumes could drop by around 4 per cent, while the monthly value of transactions may decline by nearly 10 per cent after the introduction of the charge.

The estimates are based on separate surveys of merchants and consumers conducted by LocalCircles ahead of the proposed MDR rollout.

A survey released by LocalCircles on October 2 indicated that only 14 per cent of UPI users surveyed would continue using UPI for payments above ₹2,000 and absorb the additional cost if merchants pass the MDR on to customers.

Around 27 per cent said they would switch to cash, while 26 per cent preferred credit cards and another 14 per cent said they would use debit cards for such transactions.

Overall, 76 per cent of respondents said they expected to move larger payments away from UPI towards cards, cash or bank transfers if using UPI resulted in an additional charge.

The survey collected more than 67,000 responses from UPI users across 291 districts, according to LocalCircles.

The MDR is a fee charged for processing digital payments and is generally paid by merchants to banks and payment service providers.

The government announced on September 14 that UPI merchant transactions of up to Rs 2,000 would remain protected from MDR, along with RuPay debit card payments. However, a 0.4 per cent MDR on person-to-merchant (P2M) UPI transactions above Rs 2,000 is scheduled to take effect from October 15.

Small merchants receiving up to Rs 1 lakh a month through UPI QR codes will remain exempt from the charge.

The proposed fee has raised concerns about its potential impact on consumer payment preferences and merchant adoption, particularly if businesses choose to pass the additional cost on to customers.

UPI recorded 24.51 billion transactions worth Rs 29.82 trillion in August 2026, according to the data cited by LocalCircles.

Merchant transactions accounted for 15.51 billion transactions worth Rs 8.95 trillion during the month.

Notably, transactions above Rs 2,000 represented around 67 per cent of the total value of merchant UPI payments. This makes the response of consumers and merchants to the new MDR particularly significant for overall UPI transaction value.

If the survey findings translate into actual payment behaviour, the introduction of MDR could result in a shift in higher-value transactions towards cards, cash and bank transfers, even as UPI continues to dominate digital payments for smaller transactions.