The rapid rise of UPI transactions is creating new financial pressure across the digital payments ecosystem. As usage shifts deeper into low value and high frequency payments, fintech leaders say the current government incentive support is no longer enough to keep pace with growing operational demands.
Industry executives noted that while India’s UPI system continues to set global benchmarks for scale, the economics under the zero MDR regime are under strain. With transaction volumes expanding faster than incentives, the focus has moved from cost recovery to maintaining system stability, resilience, compliance and fraud controls.
“As UPI volumes scale into billions of largely low value transactions, the incentive pool is inevitably spread thinner on a per transaction basis. The Rs 2000 crore allocation is meaningful as a signal of continuity and policy intent, but it does not fully offset the rising costs of processing, compliance, fraud monitoring and system resilience at scale,” said Anup Agarwal, Co founder, Kiwi. He added that the incentive was never meant to make payments profitable on its own, but to preserve affordability and reliability as the ecosystem matures.
Sharing a similar view, Mehul Mistry, Senior Vice President Customer Success, Growth and Strategy at Zeta, said, “At today’s UPI scale of 150 billion transactions annually, a Rs 2000 crore incentive translates to only a few paise per transaction, which increasingly falls short of the full cost of secure processing and compliance. As volumes mature, incentives need to evolve with system complexity.” Industry voices also flagged that processing nearly 30 crore transactions every day for free, combined with rising RBI compliance costs, could slow future expansion. Fintech players said the ecosystem needs stronger economic support, including the option to charge a low controlled MDR of 30 BPS on UPI P2M transactions for merchants with turnover above ₹20 lakhs, to bring the next 300 million users into digital payments and expand acceptance in rural areas.
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