Dilip Asbe, Managing Director and CEO of the National Payments Corporation of India (NPCI), has emphasized the critical need for increased investment and enhanced resilience within the Unified Payments Interface (UPI) ecosystem. Addressing attendees at the SBI Conclave on September 24, Asbe detailed the growing operational expenditures and escalating cybersecurity threats facing the platform.
Asbe also provided insight into the recent decision to implement a merchant discount rate (MDR) on certain UPI transactions, a move that comes after six years of zero charges. He acknowledged the difficulty of reintroducing charges after such a prolonged period of free service, stating it was a "very difficult and painful" decision.
The Rationale Behind UPI's Merchant Discount Rate (MDR)
The NPCI CEO explained that the organization spent six months developing the new MDR structure. Last year, NPCI submitted data to the Reserve Bank of India indicating that the total cost of operating UPI had reached ₹21,000 crore.
Three primary factors guided the design of the new charges:
- Recovering a reasonable portion of the ecosystem's operational costs.
- Excluding the vast majority of transactions from MDR.
- Identifying businesses capable of absorbing the charges without passing them directly to consumers.
According to Asbe, 96% of UPI transactions by value remain unaffected by the new charges. Furthermore, 75% of merchants have not recorded a single transaction exceeding ₹2,000. The MDR primarily applies to businesses with an annual turnover exceeding ₹1,000 crore, which, Asbe noted, typically already utilize credit cards and generally do not pass those charges onto customers.
Addressing Cybersecurity Risks
As UPI continues its rapid expansion, cybersecurity has emerged as a significant concern. Asbe warned that the tools available to hackers are becoming "very powerful." He advocated for the strategic implementation of artificial intelligence (AI) to strengthen payment security, despite the associated costs. "We must use it to secure systems to prevent any incidents in the future," he stated.
The Proposed ₹3,000 Crore UPI Fund
Asbe also discussed a proposed UPI fund, which he projected could grow to approximately ₹3,000 crore. This amount would be roughly three times the size of the existing Payment Infrastructure Development Fund (PIDF).
Currently, UPI serves around 60 million active merchants, with 35–40 million of these relying solely on paper-based QR codes. The new fund aims to support initiatives such as providing soundboxes to merchants and broadening UPI adoption across the country.
Vision for One Billion UPI Users
NPCI's overarching goal, or "north star," remains to extend UPI access to every Indian citizen. Asbe articulated a broader objective to bring one billion Indians onto the UPI platform while simultaneously building infrastructure that facilitates wider access to credit and insurance services.
He referenced Brazil, which adopted mobile payments later than India but has already achieved over 90% mobile-payment penetration, as an example of the potential for future growth. Asbe concluded that slower UPI growth has largely been attributable to insufficient investment in the ecosystem, underscoring that sustained infrastructure spending is crucial for its next phase of development.