When people ask why India should move from a completely free UPI model toward a system where the companies building and operating the payment ecosystem can actually earn money, they often look at it only from the perspective of a transaction fee.
I think we should look at the larger picture.
UPI is not merely a payment product. It is strategic digital infrastructure.
For years, companies such as Pine Labs, Paytm and PhonePe have built technology, merchant networks, QR infrastructure and payment devices around digital payments.
The broader ecosystem has supported payment networks including Visa, Mastercard, American Express, RuPay and UPI.
The important question is:
Who ultimately owns the rails through which a country's payments flow, and who has the economic incentive to keep building and exporting those rails?
The problem with making critical infrastructure economically unsustainable
UPI was deliberately made extremely inexpensive for consumers and merchants.
That helped India achieve enormous scale.
But infrastructure also has to be maintained, upgraded, secured and expanded.
If the companies operating the ecosystem cannot generate sustainable revenue from it, they have to depend on other sources of income, investor capital, adjacent businesses or government support.
That is not necessarily a sustainable model for something that has become critical national infrastructure.
This is why the current change in UPI economics is significant.
What are the UPI charges now?
As of 22 September 2026, UPI remains free for individuals.
From 15 October 2026, a new Merchant Discount Rate, or MDR, will apply to specified merchant transactions above ₹2,000:
UPI transaction| MDR position
Person-to-person payments| ₹0
Merchant payment up to ₹2,000| ₹0
Eligible merchant payment above ₹2,000| 0.4% MDR
MDR on transactions of ₹75,000 or more| Capped at ₹300
Small merchants covered by the zero-MDR framework| ₹0
Certain essential sectors above ₹2,000| ₹5 flat MDR
Capital-market transactions| 0.02%, capped at ₹300
Importantly, this is not a charge that consumers will pay separately. The MDR operates within the merchant payment ecosystem and is distributed among participating banks, payment service providers and UPI application providers. Person-to-person transactions remain completely free, while payments to merchants up to ₹2,000 also remain free. The Government says approximately 96% of P2M transactions will remain unaffected.
So the headline should not be:
"India is charging people for UPI."
The more accurate description is:
India is beginning to create a sustainable economic model for part of its UPI infrastructure.
And that is strategically important.
RuPay already gives us an example
There is another Indian payment network that is important to this discussion: RuPay.
RuPay is India's domestic card network, developed by NPCI.
It was created so that India would have its own card-payment infrastructure rather than relying entirely on international networks such as Visa and Mastercard.
RuPay has its own payment economics, including interchange and other ecosystem arrangements. NPCI documentation, for example, explicitly refers to RuPay interchange charges and payment-service-provider/app-provider economics.
At the same time, India has deliberately maintained zero MDR for RuPay debit-card transactions under its policy framework.
This distinction matters.
Zero MDR does not mean zero cost.
It means the policy has chosen not to impose that particular merchant charge on specified transactions.
The network still requires technology, cybersecurity, processing infrastructure, banks, switches, settlement systems and continuous investment.
UPI is now confronting the same fundamental question:
How do you keep a strategic payment network affordable while also making the ecosystem sustainable enough to keep investing in it?
Why the economics matter
Companies such as Pine Labs, Paytm and PhonePe have invested heavily in payment technology and merchant infrastructure.
If the ecosystem develops a sustainable commercial model, Indian companies have a stronger economic incentive to invest in:
• Better payment technology
• Cybersecurity
• Fraud prevention
• Artificial intelligence
• Merchant infrastructure
• Payment hardware
• International expansion
• Cross-border payments
• Interoperability with foreign payment systems
This changes the proposition completely.
Instead of UPI being merely an Indian domestic payment system, India could increasingly export payment infrastructure and expertise.
Why the Russia and Iran examples matter
The events involving Russia and Iran demonstrate why financial infrastructure can become a strategic issue.
In March 2022, Visa and Mastercard suspended operations in Russia. Russian-issued cards stopped working outside Russia and foreign-issued Visa and Mastercard cards stopped working within Russia.
Iran provides an even longer-running example.
Iranian banks have faced restrictions on access to international financial infrastructure, including disconnection from SWIFT during the sanctions regime.
The lesson is not about whether one agrees or disagrees with those sanctions.
The lesson is much simpler:
Control over financial infrastructure can create geopolitical leverage.
If a country's economy depends completely on financial infrastructure controlled outside the country, geopolitical decisions made elsewhere can potentially affect its ability to transact internationally.
That is why payment sovereignty matters.
India already has independent domestic financial infrastructure
India has not built just one payment system.
We have:
NEFT
RTGS
UPI
RuPay
These systems serve different purposes.
NEFT provides electronic fund transfers, while RTGS provides real-time settlement, particularly for high-value transactions.
The important point is that India has its own domestic financial infrastructure.
We do not need SWIFT to move money from one Indian bank account to another through the domestic banking system.
This does not mean NEFT or RTGS have "replaced SWIFT". SWIFT is primarily a global financial messaging network, whereas NEFT and RTGS are Indian payment and settlement systems.
For international transactions, Indian banks still participate in the global correspondent-banking and messaging ecosystem.
But having strong domestic infrastructure gives India an important foundation.
And the next logical question is:
Can these capabilities become increasingly interconnected with payment systems outside India?
From domestic infrastructure to international infrastructure
UPI has already begun moving beyond India's borders.
NPCI has developed UPI Global Acceptance and international UPI linkages, allowing Indian payment technology to be used in participating overseas markets.
That is only the beginning.
The long-term possibility is much larger.
Imagine a world in which Indian payment infrastructure connects with payment systems in other countries.
India does not necessarily need to replace Visa, Mastercard or SWIFT.
It needs to ensure that there are alternatives and choices.
That is how strategic resilience works.
And this is where BRICS becomes interesting
BRICS has expanded considerably.
As of 2026, BRICS has 11 full members:
Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates, with Indonesia as the eleventh member.
Together, these countries represent approximately 49.5% of the world's population, 40% of global GDP and 26% of global trade, according to the Government of India.
Now imagine greater interoperability between the payment systems of these countries.
Not necessarily a single BRICS currency.
Not necessarily one payment application.
But interconnected national payment systems that allow countries to conduct more bilateral trade and settlement using their own currencies and payment infrastructure.
China has already built the Cross-Border Interbank Payment System, or CIPS, for international RMB clearing and settlement.
Russia has developed its own financial messaging and payment infrastructure.
India has UPI, RuPay, NEFT and RTGS.
Other BRICS members have their own financial systems.
The strategic possibility is therefore not difficult to understand:
National payment systems can increasingly become interconnected.
If that happens, countries could potentially reduce their dependence on any single external financial network for at least some categories of cross-border transactions.
This is not something that will happen overnight.
There are major issues involving currency convertibility, regulation, liquidity, settlement, trust, cybersecurity and interoperability.
But strategically, the direction makes sense.
China understood this too
China's CIPS is an important example.
CIPS provides clearing and settlement services for cross-border RMB transactions.
It is not completely disconnected from SWIFT and still interacts with the international financial messaging ecosystem.
But China has deliberately built its own infrastructure and expanded its capacity.
The principle is simple:
Do not wait for a crisis before building an alternative.
Build the alternative first.
That is precisely the kind of strategic thinking India should follow.
Now consider navigation
The same philosophy can be seen in another area: satellite navigation.
The United States has GPS.
Russia has GLONASS.
China has BeiDou.
The European Union has Galileo.
Japan has QZSS.
India has NavIC — Navigation with Indian Constellation.
ISRO describes NavIC as an independent, stand-alone Indian navigation satellite system. Unlike GPS, which is operated by the United States, NavIC is under the control of the Government of India and provides an independent navigation capability over India and the surrounding region.
Kargil and the lesson of dependence
The Kargil War provides an important historical context.
During the 1999 conflict, India faced restrictions on access to certain GPS information that could have assisted military operations.
The experience contributed to India's recognition of the strategic importance of having an independent satellite-navigation capability.
The important point is not simply whether one describes this as America "switching off GPS".
The deeper lesson is:
A country should not depend entirely on another country's technology for a critical national capability.
A nation has permanent interest not permanent friends. This is reality of today's world yesterday world and the world that is coming it was there during Mahabharat or Ramayan, it's there in Arthashastra the famous book by Chanakya
India subsequently developed NavIC.
And today NavIC is not simply a military technology.
It has civilian and strategic applications across the country.
NavIC is useful far beyond defence
NavIC is designed to support:
• Land navigation
• Maritime navigation
• Aviation
• Vehicle tracking
• Fleet management
• Timing and synchronisation
• Telecommunications
• Surveying and mapping
• Fishing vessels
• Transportation
• Disaster management
ISRO specifically identifies disaster management as one of NavIC's applications.
The Government has also highlighted applications such as real-time train tracking, fishing-vessel communication and location systems for public and commercial vehicles, alongside secure navigation services.
Think about a major cyclone, flood or other disaster.
Communication networks may be disrupted.
Roads may become inaccessible.
Power infrastructure may fail.
Emergency teams need accurate positioning.
Relief vehicles need navigation.
Search-and-rescue teams need location information.
Ships and aircraft need reliable navigation.
Having an indigenous satellite-navigation capability gives India an additional layer of resilience that it controls itself.
That is strategic infrastructure.
The same principle applies to payments
This is why UPI, RuPay, NEFT, RTGS and NavIC should be looked at as part of a much larger philosophy.
The objective is not to isolate India from the world.
It is exactly the opposite.
The objective is to make India capable of participating in the world while having alternatives when circumstances demand them.
Use Visa.
Use Mastercard.
Use SWIFT.
Trade in dollars.
Trade in euros.
Trade in yuan.
Trade in rupees.
There is nothing wrong with using international systems.
But simultaneously build Indian alternatives.
Because having an alternative gives you resilience.
From "Made in India" to "Used by the World"
This is ultimately the larger opportunity.
India did not build UPI merely so Indians could scan QR codes faster.
India built a payment architecture at enormous scale.
India built RuPay.
India built NEFT and RTGS.
India built NavIC.
These are examples of the same underlying philosophy:
Build critical capabilities at home.
Make them affordable and scalable.
Allow Indian companies to participate economically in their growth.
And eventually take those capabilities to the world.
If Indian payment companies can earn sustainable revenue from payment infrastructure, they can invest more in technology, cybersecurity and international expansion.
If other countries adopt Indian payment technology, India moves from being merely a user of global infrastructure to becoming a provider of global infrastructure.
That is a profound economic opportunity.
This is not about isolation
Building UPI is not anti-American.
Building NavIC is not anti-American.
Building RuPay is not anti-Visa.
Building domestic financial infrastructure is not anti-SWIFT.
China building CIPS does not automatically mean China wants to disconnect itself from the global financial system.
These are examples of countries developing strategic capabilities of their own.
A country as large as India cannot reasonably want complete dependence on infrastructure controlled elsewhere.
The objective should be straightforward:
Use the world's infrastructure where it makes sense, but build enough of our own infrastructure that we always have alternatives.
That is what NEFT and RTGS provide domestically.
That is what UPI provides in real-time retail payments.
That is what RuPay provides in card payments.
That is what NavIC provides in satellite navigation.
And potentially, over time, an internationally interoperable Indian payment network could provide the same strategic resilience in cross-border finance.
The debate over UPI charges should therefore not be reduced to the cost of one transaction.
The bigger question is:
Do we want India merely to use global digital infrastructure, or do we want India to build infrastructure that the world uses?
If the answer is the latter, then sustainable economics matter.
The objective is not to make UPI expensive.
The objective is to make Indian payment infrastructure sustainable enough to grow.
Because strategic independence does not mean isolation.
It means having choices.
And this is strategic growth not anything else.
