Amazon Pay India CEO bats for balanced MDR to support stakeholders

A non-arbitrary merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions should be determined after discussions between the regulator and industry, Amazon Pay India chief executive officer (CEO) Vikas Bansal told Business Standard on Tuesday. 

“For any payment method to succeed, there has to be a value exchange among the participants —merchants, customers, and payment providers/banks. Some level of MDR helps enable that value exchange,” he said. 

MDR is a fee paid by merchants to banks for processing real-time digital transactions. Currently, UPI and RuPay debit card payments attract no MDR, a policy implemented through the National Payments Corporation of India (NPCI). 

This zero-MDR regime has been in effect since it was announced in the FY22 Budget to boost digital adoption. Previously, merchants paid a fee of under 1 per cent of the transaction amount. With UPI becoming the dominant retail payments method and RuPay gaining traction, many experts argue that a complete waiver on MDR may no longer be sustainable. 

Bansal emphasised that the structure and rates of MDR should not be arbitrary but carefully crafted through consultation between the regulator and the industry.

 

Drawing a comparison with global practices, he highlighted that in China, MDR is typically around 30–50 basis points (bps). “You can look at international benchmarks and decide what’s best for the country. But ultimately the regulator and industry should determine the right approach,” he added.

 

The remarks come at a time when the payments industry is closely watching regulatory discussions around MDR on UPI transactions, which have significant implications for the growth and sustainability of digital payments in India.

 

Several industry stakeholders have questioned the long-term viability of the zero-MDR model, highlighting the cost burden on banks and payment service providers. Earlier this year, the Payments Council of India — representing digital payment service providers — wrote to Prime Minister Narendra Modi, requesting the reintroduction of MDR. The council recommended a 0.3 per cent MDR on UPI payments made to large merchants and proposed a nominal, fixed MDR on all RuPay debit card transactions.

 

Bansal said Amazon Pay is bullish on buy now, pay later. “One of our big purposes is to make shopping affordable for customers, which in turn helps sellers. Products like buy now, pay later are very critical because they solve a real need — managing budgets and monthly expenses. BNPL is meeting an important customer need,” he added.

 

About addressing the cyber security concerns, Bansal said that trust is the most important part of payments. “Customers are trusting us with their money, so security is non-negotiable. We use advanced machine learning models that analyse thousands of parameters to ensure every transaction is secure and reliable. We continue to invest heavily in security and technology to keep payments safe,” he added.

 

According to the Reserve Bank of India’s (RBI) annual report for FY25, digital payments have surged nationwide. UPI accounted for 185.8 billion transactions during the year — a 41.7 per cent surge from 131.1 billion in FY24.

 

To promote continued adoption, the Union Cabinet recently extended a ₹1,500-crore incentive scheme designed to compensate stakeholders for the cost of small-value UPI transactions.

 

However, fintech firms have criticised the amount, arguing it is insufficient to support the surging volume of digital payments.