UPI new rules: Will American companies benefit from the new rules on UPI payments?
A major change in UPI payment rules is set to take effect on October 15, 2026. Under the new framework, a Merchant Discount Rate (MDR) of up to 0.4% will apply to certain merchant UPI transactions exceeding ₹2,000. However, this charge will be borne by the merchant, not the customer. This raises the question: with the introduction of MDR in UPI, could American companies like Visa and Mastercard also benefit?
First, let’s understand what MDR is.
MDR, or Merchant Discount Rate, is a fee charged to businesses that accept digital payments. In the case of credit cards, this amount is split among various stakeholders, which may include the card-issuing bank, the acquiring bank (which accepts the payment), the card network, and other payment service providers.
For instance, if an MDR of 2% applies to a credit card transaction of ₹3,000, the fee amounts to ₹60. This sum is distributed among the various parties involved in the payment system; card networks like Visa or Mastercard also receive a network fee from this amount.
What will change for UPI?
According to the new NPCI framework, an MDR of 0.4% will apply to eligible merchant UPI transactions exceeding ₹2,000. The fee will be capped at a maximum of ₹300 for transactions of ₹75,000 or more.
For example, the MDR on an eligible UPI merchant payment of ₹3,000 would be ₹12, and on a payment of ₹50,000, it would be ₹200. For a payment of ₹1 lakh, the 0.4% rate would amount to ₹400, but due to the cap, the MDR would remain at ₹300.
However, UPI payments will remain free for the average customer. There will be no MDR on P2P (person-to-person) transfers. Provisions for zero MDR also exist for small P2PM merchants, subject to specific conditions.
Will American companies benefit?
It is important to understand the roles of Visa and Mastercard here. These are card networks, whereas UPI operates on its own domestic payment infrastructure. When payments are made via credit cards, card networks receive a portion of the fees associated with the Merchant Discount Rate (MDR). The proposed MDR structure for UPI differs, and the revenue generated is not directly allocated to Visa or Mastercard.
Therefore, the mere application of MDR to UPI does not imply a direct benefit for US card companies. The operational parameters and the framework for distributing fees under the new UPI model will be determined by the NPCI and the relevant systems.
**A fundamental shift in the payment system's business model**
UPI has long functioned as a free digital payment system for consumers. The objective behind levying a limited MDR on large merchant transactions is to establish a sustainable commercial model for UPI.
According to NPCI FAQs, UPI processed 2,451 crore transactions in August 2026, with a total value of approximately ₹29.9 lakh crore. Operating such a vast network entails continuous expenditure on infrastructure, including servers, telecommunications, cybersecurity, and banking software.
**What is the impact on the consumer?**
Currently, the new regulations do not include a provision to levy separate UPI charges on consumers. This means that if a customer purchases goods worth ₹5,000 at a store and pays via UPI, they will only pay ₹5,000. The applicable MDR is a merchant-side charge, and passing this cost on to the consumer will not be permitted.
Thus, rather than viewing the new rule as a move that directly benefits US companies, it is more accurate to see it as a shift in UPI's commercial model. The actual impact will depend on how the fees generated from the new MDR are distributed and which stakeholders within the payment ecosystem participate in the process.
Disclaimer: This content has been sourced and edited from TV9. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
