Merchant Fees and the Sustainability of UPI Adoption Among Small Retailers in India: A Conceptual Framework and Panel Research Design (International Journal For Multidisciplinary Research)

Summary

• The Government of India introduced a 0.4% Merchant Discount Rate (MDR) on UPI transactions exceeding ₹2,000 from 15 October 2026.p.2
• A cap of ₹300 was imposed on transaction amounts reaching or exceeding ₹75,000.p.2
• Small merchants generating up to ₹1 lakh monthly in UPI QR transactions remain exempt from the fee.p.2
• The conceptual framework examines five testable hypotheses regarding merchant fee exposure, trust, tax-visibility concerns, and UPI continuance.p.4
• A longitudinal mixed-methods panel design is proposed around the effective policy intervention date of 15 October 2026.p.4

Key insights

1. The paper conceptualises how capped merchant fees affect the ongoing continuity of UPI acceptance among small retailers in emerging markets.p.1
2. Reliability and transaction confirmation operate as foundational preconditions before merchants evaluate secondary benefits or fee costs.p.3
3. Small merchant onboarding and servicing costs can outweigh the direct revenue they yield, making merchant acceptance a collective action issue.p.3
4. Merchant concerns regarding tax visibility and digital sales trails can present stronger barriers to adoption than infrastructure or bank account access.p.3
5. Demographic and regional disparities amplify perceived operational risks in lower-literacy and lower-connectivity areas.p.4