How credit card route to UPI may come at a price for merchants

Smaller merchants can be subsidised to make it work

The Reserve Bank of India’s (RBI’s) recent decision to allow credit cards for payments through the Unified Payments Interface (UPI) is likely to attract a merchant discount rate (MDR), said a top payment industry source. For smaller merchants, a subsidy for MDR could be provided.

“With credit card-UPI linkage, UPI will not only be a payment instrument but also a lending platform. How can banks lend without a commercial model? Also, the government has said MDR will be zero for payment products but not for lending products,” the source said, indicating the MDR regime for credit card-linked UPI payments.

MDR