Nearly three out of four users in India say they would abandon the Unified Payments Interface (UPI) if transaction fees were introduced, according to a recent LocalCircles survey—highlighting just how sensitive the country’s digital payments ecosystem is to pricing changes.
Read More | Fintech India Innovation Awards 2026: A Look at this Year’s Standout Performers
Strong resistance to UPI charges
The survey findings leave little room for ambiguity. Around 75 per cent of respondents said they expect UPI to remain free and would stop using it if charges were imposed. Only a quarter indicated they might be willing to pay. Even within this smaller group, there was no consensus on how fees should be structured. Some preferred a flat charge per transaction, others leaned toward a percentage-based model, while a few supported a hybrid approach. The lack of a clear preference suggests that any pricing strategy could face pushback.
The survey drew over 39,000 responses from 376 districts, offering a broad snapshot of consumer sentiment on a question that is increasingly central to the future of digital payments in India.
Scale without incentives
The resistance comes despite UPI’s remarkable growth. The platform processed more than 240 billion transactions in FY26, with the total value exceeding ₹314 trillion—cementing its position as the backbone of India’s digital payments ecosystem. Yet, behind this scale lies a structural challenge. Industry observers have pointed out that, more than a decade after its launch, UPI operates with limited financial incentives for participants. The absence of a merchant discount rate (MDR) has been a key constraint, raising concerns about long-term sustainability.
Banks bear the cost
The issue is particularly pronounced for banks, which handle the infrastructure but see little direct financial return. Axis Bank MD Amitabh Chaudhry recently summed it up bluntly, noting that banks “earn nothing” from UPI transactions despite shouldering the associated costs. As transaction volumes continue to surge, this imbalance between usage and revenue has become harder to ignore. Payment service providers and banks alike are increasingly questioning how the system can remain viable without some form of monetisation.
Read More | RBI Tightens Digital Payment Security Norms, Signals Shift Beyond OTP-Authentication
Early signs of strain
The pressure is already visible at the ground level. According to the survey, 57 per cent of users encountered at least one instance in the past year where a merchant declined UPI and insisted on cash. Nearly one in five said this happened frequently. These experiences point to growing friction, particularly among small businesses, even before any formal fee structure has been introduced.
Walking a tightrope
The findings underscore a fundamental tension. UPI’s rapid adoption has been built on the promise of free, seamless transactions. At the same time, the cost of maintaining and expanding the system continues to rise. As the survey puts it, while adoption may be widespread, willingness to pay is not.
Read More | AI Summit 2026: NPCI Extends ‘UPI One World’ Wallet to International Delegates
With UPI now entering its second decade, the debate is shifting. The question is no longer about scale, but about sustainability. Introducing fees risks alienating users, while keeping the platform free puts increasing pressure on the institutions that support it. For policymakers, the challenge lies in striking a balance—preserving the accessibility that drove UPI’s success while ensuring the ecosystem remains financially viable in the years ahead.
