Startup Policy Forum Backs MDR on UPI, Advocates for Fair Growth in Digital Payments:

Two days after the Payments Council of India (PCI) recommended the introduction of merchant discount rate (MDR) on UPI and RuPay debit card transactions, the Startup Policy Forum (SPF) has stepped in, emphasizing the need to ensure a level playing field in India's growing digital payments sector.

On March 26, SPF released a statement advocating for policy measures that foster competition and guard against market domination by a few major players.

MDR Proposal: A Case for Sustainability and Inclusion

SPF joined PCI in supporting the introduction of MDR, arguing that a viable revenue model is essential for smaller fintech firms to continue investing in innovation and security.

“We believe this policy reform will be a gamechanger as it will empower the next 500 million Indians by enabling their participation in India’s digital payment ecosystem,” SPF stated.

Unlike a one-size-fits-all approach, SPF proposed a two-tiered MDR model:

Large Merchants: Will fall under the new MDR framework.

Small Merchants: Will continue to benefit from the zero MDR policy.

This distinction aims to balance growth and financial inclusion, allowing small businesses to accept digital payments without cost pressure, while larger merchants contribute to system sustainability.

Need to Support Smaller Fintech Players

The SPF also cautioned against growing market consolidation, noting the dominance of a few large payment firms. To preserve innovation and diversity, SPF called for regulatory support for smaller fintech players, ensuring that the industry remains competitive, balanced, and inclusive.

“India’s digital payments landscape also needs to leverage competition to ensure a more evenly distributed and balanced ecosystem,” the forum highlighted.

Industry Reaction to PCI’s Approach

The PCI's direct outreach to Prime Minister Modi has stirred controversy in the fintech sector. Some members reportedly expressed concern over not being consulted, raising questions about internal consensus within the payments community.

Notably, several prominent fintech firms such as Razorpay, BharatPe, Pine Labs, Cred, Jupiter, and Mobikwik are associated with both PCI and SPF, making the debate around MDR more layered and significant.