- Former NPCI chief Santanu Paul says India should keep UPI free for ordinary citizens
- Any change must carefully protect consumers and small businesses, he warns
- He suggests a charge limited to large merchants may eventually be acceptable
Standing amid the crowded lanes of Chandni Chowk, one of India's largest commercial hubs where transactions worth tens of thousands of crores take place every year, the transformation of India's economy is visible in the blink of an eye or scan of a QR code. Street vendors, shopkeepers, wholesalers and customers routinely complete transactions using the Unified Payments Interface (UPI), a digital payments platform that has revolutionised the way Indians exchange money.
The success of UPI has been built on a simple promise: instant payments that are free for ordinary citizens and small merchants. That model has helped drive an extraordinary shift away from cash and positioned India as a global leader in digital payments.
Now, however, a debate is intensifying over whether some form of merchant discount rate (MDR) or transaction charge should be introduced for certain categories of UPI transactions, particularly those involving large merchants. The discussion comes amid reports of international pressure and concerns raised by global card payment companies that have seen their dominance challenged by India's home-grown digital payment network.
Finance Minister Nirmala Sitharaman has repeatedly emphasised that UPI has delivered enormous benefits to the Indian economy and has supported the government's efforts to expand digital payments. The government has also continued to subsidise the digital payments ecosystem to encourage adoption.
Read: UPI To Remain Free For Consumers, Merchants May Face Small Fee: Centre
Speaking to NDTV in the bustling Chandni Chowk market, Santanu Paul, a computer scientist, former director of the National Payments Corporation of India and co-author of the upcoming book 'Cashless Nation', argued that UPI's remarkable success is directly linked to its free-to-use model and warned that any changes must carefully protect consumers and small businesses.
"I don't think consumers will ever be charged. Payers will never be charged. More than 95% of the merchants will probably not be charged ever," he said.
According to Paul, the issue is not whether ordinary users should start paying for digital transactions. Instead, he believes the challenge lies in developing a sustainable business model that can support the future growth of UPI.
"There is a fundamental issue. We don't seem to have a sustainable business model for UPI to keep it growing to the billion people and the kind of size we want it to be. UPI usage can still grow by five fold in our country in the next decade," he said.
Santanu Paul, former director of the National Payments Corporation of India
Paul suggested that some form of charge limited to large merchants and large transactions may eventually be acceptable.
"Having a little bit of a business model adjustment where certain large merchants pay for certain large transactions is an acceptable compromise," he said.
He added that any fee should remain significantly below the levels generally associated with international card payment systems.
"Maybe 0.3 to 0.4% MDR will come eventually, and that will be the charge that large merchants pay for transactions, perhaps larger than Rs 2,000 per transaction."
Yet Paul drew a clear red line when it comes to ordinary citizens and small traders.
"It should not go to the customer. It should not go to the payers. It should not go to the small merchants," he said.
Read: UPI Will Stay Free For Consumers And Small Merchants: Payments Council
The protection of small merchants, he argued, remains essential because they are the biggest beneficiaries of India's digital payments revolution.
"India has 100 million small merchants. We are 65% of our way there. Until every small merchant is able to use the system, we should not be touching them."
Paul also pointed out that the government itself gains substantial economic benefits from the shift to digital payments. Less cash in circulation means reduced expenditure on printing currency, transporting cash, and maintaining cash infrastructure.
"There are a lot of savings the government is getting from not printing as many currency notes. There is a lot of savings in all of that. ATMs are not being used as much," he said.
Because of those savings, he believes the government can continue supporting small merchants while exploring limited charges for bigger businesses.
"So I would say nothing for small merchants, nothing for payers, nothing for consumers, nothing for citizens, but large transactions and large merchants, maybe."
During the recent Monsoon Session, Finance Minister Sitharaman declared in Parliament that UPI will remain free.
"UPI has remained free for consumers since launch and every Indian will continue to make this instant digital payment without paying any transaction charge," she said.
She added that the new Bill amends Section 10A of the Payment and Settlement Systems Act, 2007, serving as an "enabling provision" that grants the central government the legal backing to decide which specific electronic payment modes must remain free.
A politically sensitive aspect of the debate concerns allegations that India is facing pressure from the United States and powerful financial interests seeking a greater role in the Indian payments market.
Global payment giants Visa and Master Card have watched India build one of the world's most successful digital payments systems outside the traditional card networks. The explosive rise of UPI has changed the competitive landscape and reduced dependence on conventional card-based payment systems for millions of transactions.
Asked whether India was acting under pressure from US President Donald Trump or broader American trade interests, Paul acknowledged that such concerns are widely discussed.
"The rumours are there. I don't know for sure what is actually happening behind the scenes, but it's probably true that the entire global trade situation is such that the US has been putting pressure on a lot of countries," he said.
However, he was emphatic that India's policy decisions should be guided solely by national interest.
"India should not do whatever it needs to do for the reasons that America wants it to be done. It should be done because we need it to be done," he said.
He added, "That's strategic autonomy. I think we should definitely assert our rights on that front."
For many observers, that statement captures the central issue facing policymakers. UPI is not merely a payments platform. It is one of India's most successful digital public infrastructure projects and has become a symbol of technological self-reliance.
As India evaluates the future economics of the UPI ecosystem, Paul's message is clear: The digital payments revolution has succeeded because it is free for citizens and accessible to small merchants. Any future charges, if introduced, should be narrowly targeted at large commercial transactions. More importantly, India should make that decision because it serves India's interests and not because of pressure from abroad.
From the bustling markets of Chandni Chowk to the smallest villages across the country, UPI has transformed the way India pays. Its next chapter, many believe, must preserve the very principles that made it a success in the first place.
