PhonePe CEO Samir Nigam has strongly defended the proposed Merchant Discount Rate (MDR) for select Unified Payments Interface (UPI) transactions, directly addressing and dismissing criticisms from former BharatPe co-founder Ashneer Grover.
Nigam Defends UPI MDR Framework
Speaking on the matter, Nigam argued that the new MDR framework, which applies to UPI transactions above ₹2,000, remains significantly more affordable than traditional card payments. He pointed out that approximately 95-96% of all UPI merchant transactions are below this ₹2,000 threshold and will therefore continue to be MDR-free. These include common daily payments such as groceries, rickshaw fares, and public transport.
Nigam also reminded critics that UPI was not always a zero-MDR system, having initially carried a 0.65% MDR before the government made it free in 2020. He suggested that UPI's rapid growth before this change indicates that a free model isn't a strict prerequisite for widespread adoption. Furthermore, he emphasized that at 0.4%, UPI's MDR is the lowest globally when compared to other payment networks, which can charge 1.5% to 2.5% for credit and RuPay card transactions.
Merchants Prohibited from Passing Charges
Addressing concerns that merchants might pass the MDR cost to consumers, Nigam clarified that merchants are legally prohibited from doing so. He cited official notifications and NPCI circulars explicitly confirming this, stating that any such attempt would be illegal.
For specific high-volume categories like insurance, petrol, and bill payments, a ₹5 cap has been implemented on the MDR. Stock broking transactions carry an even lower MDR of 0.02%. Nigam also countered the notion that MDR amounts to a 'tax,' stating that it allows businesses like PhonePe to operate sustainably without relying on government subsidies, raising their own equity and debt.
Ashneer Grover's Stance
In contrast, Ashneer Grover has been a vocal critic of introducing any charges on UPI, warning that it could undermine India's successful digital payments ecosystem. He argued that 'Free UPI is the only UPI' and that charging for transactions could lead to its demise. Grover also questioned the effectiveness of the ₹2,000 threshold, noting that higher-value transactions, though fewer in volume, represent a significant portion of the total transaction value.
Nigam, however, remained unfazed by Grover's remarks. "I don't take critics like Ashneer Grover seriously," he stated, reinforcing his position that a sustainable commercial model is essential for the long-term viability and expansion of the UPI network, especially as transaction volumes continue to surge.