Shared Infrastructure in UPI: Challenges in Isolating Costs
MUMBAI: State Bank of India (SBI) Chairman CS Setty stated that quantifying the increase in operating costs due to the rising volume of UPI transactions is challenging. This comes amid ongoing discussions about introducing charges on UPI merchant payments. Setty noted that SBI’s apps have a minimal share in the payments sector, attributing this to the bank having “completely missed the bus” on payments.
Setty explained that the bank cannot specifically identify additional operating costs related to UPI transactions, as much of the infrastructure is shared. He mentioned that SBI is working to transition customers to its Yono app for UPI payments, but it still lags behind competitors like Google Pay and PhonePe. Regarding potential merchant fees for UPI, Setty indicated that there is only an enabling provision, and the specifics would depend on government actions.
According to data from the National Payments Corporation of India (NPCI), SBI recorded 631.6 crore UPI transactions in June 2026, with only 2.3 crore transactions processed through its own apps. The government is considering legal changes to allow UPI charges, particularly for merchant payments exceeding Rs 2,000, to support infrastructure development and customer acquisition. Fintech companies argue that UPI is not without costs, as they face increased expenses related to core banking, network usage, security upgrades, and SMS alerts.
Amrish Rau, CEO of Pine Labs, noted that Parliament is moving to amend the Payment & Settlement Act to enable some form of Merchant Discount Rate (MDR) while keeping consumer payments free. He pointed out that both Brazil’s PIX and China’s real-time payment systems have always included merchant charges of 30-40 basis points, yet both have achieved over 90% penetration among users and merchants. Rau added that UPI processes nearly 23 billion interoperable payment transactions monthly, with costs for IT, innovation, and cybersecurity rising by nearly 300% in the past 12-24 months.
Mehul Mistry, SVP at Zeta, projected that UPI MDR could range from 0.05% to 0.07%, while RuPay debit card MDR might be around 0.15% to 0.2%, applicable only to large merchants.
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