UPI Payments Set New Record in October with 25.47 Billion Transactions

A record 25.47 Bn UPI transactions were processed in October, up 5.8% month-on-month from 24.07 Bn in September, as reported by the National Payments Corporation of India (NPCI). From INR 29.37 Lakh Cr last month to a record INR 31.53 Lakh Cr this month, the value of transactions completed through the Unified Payments Interface (UPI) climbed 7.4% month over month. Transaction value increased by 16% year over year, while volume increased by 23%.

For the first time ever, in October, UPI handled over 25 billion transactions and payments totalling over 30 lakh crore Indian rupees. Also, for the first time, the average daily transaction amount surpassed INR 1 Lakh Cr. October saw an increase in UPI's average daily transaction volume from 802 million to 822 million. The average value of daily transactions rose from INR 97,913 Cr to INR 1,01,707 Cr.

UPI Transaction Ramps Up Despite Govt’s Plan for MDR Charges

The records were prepared before the planned MDR implementation on some merchant payments, which the NPCI had previously postponed until after Diwali. Due to October's 31 days and September's 30, the daily averages offer a more accurate comparison of payment activity. Average daily volume jumped 2.5% month-over-month, while average daily value rose 3.9%, according to NPCI's figures. The increase was in accordance with the festive season.

October's gain came after September's slight downturn, with transaction volume falling 1.8% month-over-month and transaction value falling 1.5%. The most recent numbers are released just before the merchant discount rate (MDR) is expected to be applied to some UPI transactions. The NPCI said that the new implementation date would be announced separately, postponing the deployment from October 15 to after Diwali.

What is MDR Charge?

In order to complete digital transactions, banks and payment processors charge merchants a fee known as MDR. Eligible person-to-merchant (P2M) payments above INR 2,000 will be subject to a 0.4% charge under the new framework, with a maximum cap of INR 300 for transactions exceeding INR 75,000. There would be no MDR applied to person-to-person (P2P) payments.

Banks and payment service providers that execute qualifying transactions would get a revenue stream under the new arrangement, which might improve monetisation throughout the UPI ecosystem. But before the launch, merchant groups have asked for a reduction in the extra costs associated with accepting payments.

Objection Raised by Traders’ Association on MDR Charges

Businesses with thin profit margins may see a rise in payment expenses as a result of the proposed MDR, which is why retail merchants' associations are against it. In opposition to the proposed MDR, the All India Consumer Products Distributors Federation (AICPDF) and the All India Mobile Retailers Association (AIMRA) have planned a "No UPI Day" on October 2. Following their discussion with Finance Minister Nirmala Sitharaman on September 30, the groups decided to scrap the planned demonstration.

In place of the proposed 0.40% MDR, AIMRA has advocated for a flat minimal fee for all digital transactions. The annual costs throughout the FMCG distribution and retail ecosystem could increase by INR 7,000 crore to INR 9,000 crore, according to AICPDF's estimates. A possible exemption for companies with a yearly turnover of up to INR 40 lakh from MDR is also being considered by the committee.

The previous framework had intended to exclude small merchants receiving up to INR 1 lakh per month through UPI QR codes straight into their bank accounts from the cost; this will expand that exemption. Eligible person-to-merchant (P2M) UPI transactions above INR 2,000 would be subject to a 0.40% MDR under the proposed framework, with a maximum fee cap of INR 300 per transaction.