NEW DELHI: The Unified Payments Interface (UPI), the crown jewel of India’s digital revolution, faces a critical sustainability crisis. A new large-scale consumer survey by LocalCircles indicates that nearly three in four users would stop using the service immediately if transaction fees were introduced.
The findings come at a time when the platform has reached near-universal adoption. In the 2025-26 fiscal year (FY26), UPI processed a staggering 240 billion transactions, with total values exceeding ₹314 trillion. However, this massive scale has not translated into profitability for the financial institutions powering the backend.
The 75% Rejection Mark
The survey, which captured over 39,000 responses across 376 districts, presents an explicit ultimatum from the Indian consumer. According to the data, 75 per cent of respondents stated: “There should be no charge on UPI transactions and I will stop using if a charge is introduced.”
Only a slim minority of 25 per cent expressed a willingness to bear any cost for the convenience of UPI. Even within this segment, there was no consensus on how such fees should be structured, with opinions split between fixed fees, percentage-based pricing, and hybrid models.
Banks Flag “Zero Returns” Infrastructure
While consumers demand a free service, the banking sector is highlighting the growing cost of maintaining the digital rails. Axis Bank Managing Director Amitabh Chaudhry recently noted that banks “earn nothing” from UPI transactions despite the heavy investment required for technological infrastructure.
Industry experts argue that the absence of a Merchant Discount Rate (MDR)—the fee merchants pay to banks for processing digital payments—is beginning to constrain the ecosystem’s growth. A decade after its launch, the lack of incentives for stakeholders has created a widening gap between usage growth and revenue generation.
Emerging Friction at the Merchant Level
The stress is already visible on the ground, even without formal fees. The LocalCircles study found that 57 per cent of users experienced at least one instance in the past year where a merchant refused UPI, insisting on cash instead.
For 19 per cent of users, these refusals have become a frequent occurrence. This suggests that small businesses, likely wary of future costs or current operational hurdles, are already showing signs of resistance.
A Policy Tightrope
The government and policymakers now face a delicate dilemma. UPI has scaled rapidly on the promise of free, seamless transactions, yet the financial burden on banks and payment service providers continues to rise.
“The findings highlight a clear and critical reality: while adoption is universal, willingness to pay is not,” the survey report noted. As the system enters its second decade, the focus has shifted from achieving scale to ensuring long-term economic viability without triggering a mass user exodus back to cash.
