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Instant payments, explained

Who pays for a public instant payment rail?

Clearing a payment on an instant rail is the cheap part. Running the system around it is not, and that bill lands on one of three payers: the state through subsidy, the banks in the scheme, or the merchant who accepts the payment. Which of the three carries it is a policy decision, and India has just changed its answer.

· 5 min read · Ghenadie Cernei, Founder

What NPCI published

On 15 September 2026 NPCI, the organisation that runs India's UPI, published a FAQ on introducing a merchant discount rate on payments to merchants1. The shape of it:

  • 0.4% on person-to-merchant payments above ₹2,000, capped at ₹300 per transaction for payments of ₹75,000 and above1.
  • Payments up to ₹2,000 stay free, and they account for more than 95% of merchant transaction volume1.
  • Consumers pay nothing, person-to-person transfers stay free for both sides, and UPI apps may not levy a platform fee of their own1.
  • The merchant pays its own acquiring bank. NPCI's worked example is ₹12 on a ₹3,000 purchase, and the merchant may not pass the fee on to the buyer1.

Around that sit the exceptions: a flat ₹5 above the threshold for railways, telecom, insurance and fuel, 0.02% for capital-market payments, zero for small merchants receiving up to ₹100,000 a month through a QR code into their own account, and no prescribed MDR on AutoPay mandates1. The framework itself, meaning operational parameters, fee distribution models and category caps, is set by the UPI and Services Steering Committee headed by NPCI1.

The published effective date was 15 October 20261. On 13 October 2026, two days before it, NPCI announced that the UPI and Services Steering Committee had deferred the fee: it will be implemented immediately after Diwali, on a date to be notified separately2. Only the date moved. The structure the FAQ describes, who pays whom and for what, is what will apply once the fee starts.

What the fee is for

NPCI's stated reason is that the money stays inside the UPI ecosystem and funds infrastructure resiliency, innovation, cybersecurity and customer service1. Industry estimates quoted in the document put the annual cost of running UPI at around ₹20,000 crore, about ₹200 billion, covering payment operations, server bandwidth, fraud prevention systems and bank technical support, and the document describes the government subsidy that carried that cost as short-term bridge funding rather than a permanent measure1.

Set that against what a rail charges per message. TIPS settles a euro instant payment for €0.002, split between the two banks3. FedNow4 and RTP5 charge the sending bank $0.045 whatever the amount. Clearing and settlement are priced per payment and stay small. Availability, fraud control, support and the software around the payment are what make up the annual figure.

Where the cost actually sits

A rail delivers a credit transfer between two accounts. A merchant needs a way to present the request, a final confirmation tied to this order so staff can release the goods, refunds sent as a new payment in the other direction, recurring mandates, reconciliation against invoices and shift totals, and integration with the software already on the till. That layer is A2A acquiring, and it is where the merchant's price is set.

The markets that are furthest along show where the revenue comes from. Paytm has soundboxes deployed at 15.7 million merchants and earned ₹814 crore from distributing loans and other financial products in the quarter to June 2026, 45% more than a year earlier6. The processing itself is a business of basis points; the device, the software and the credit are what monetise the merchant relationship. Bizum's in-store launch in Spain came with an estimated 0.2% to 0.3% for the merchant7. At Stone, Pix QR volume on its terminals grew 44% year on year to R$30.7 billion in the second quarter of 20268.

The structural difference with card acquiring lies in where the acceptance layer comes from. On the card rail it arrives from the acquirer as one mature product. On an A2A rail the scheme publishes a rulebook and per-transaction economics, and the acceptance layer is assembled market by market.

What the bank assembles it from

This is the part miaPOS builds: acceptance software inside the bank's perimeter, with your licence, your regulator and your relationship with the merchant. The platform generates the payment request as a QR code, a payment link or an NFC tag, receives the confirmation that the funds have arrived, and runs the merchant back office where every channel lands in one place. Request-to-pay and refunds depend on what the underlying scheme provides.

What the platform does not do is price the merchant. The bank holds the merchant relationship and sets the commercial terms, the same division of labour the Indian FAQ describes: the scheme sets the framework and the acquiring bank collects from its merchant. The category and the roles in it are set out on the A2A acquiring page, and the acceptance channels on the products page.

Common questions

Who pays the fee when a customer pays by instant payment?

In India's published framework the merchant pays, and the consumer side is explicitly free regardless of the amount, including person-to-person transfers and QR payments at a shop1. Merchants are also barred from passing the fee on to the buyer, so the customer pays the posted price1.

What does a merchant fee on an A2A rail actually pay for?

Very little of it is clearing. TIPS charges €0.002 per instant payment3, and FedNow4 and RTP5 charge $0.045 to the sending bank. The rest covers the acceptance layer and the running cost of the scheme itself, which NPCI attributes to infrastructure resiliency, cybersecurity and customer service1.

Does the scheme or the bank set the merchant's price?

Both, at different levels. The scheme sets the framework, as NPCI's steering committee does for rates, caps and exemptions1, while the merchant's own acquiring bank holds the contract and collects the fee1.

A2A acquiring with miaPOS

Building instant-payment acceptance with your merchants? See how miaPOS works with banks.

For banks

Sources

  1. Merchant Discount Rate (MDR) on Select UPI (P2M) Transactions: Frequently Asked Questions. NPCI, published on the website of the Department of Financial Services, Ministry of Finance, India, 2026-09-15
  2. Merchant Discount Rate on UPI transactions deferred to after Diwali. ThePrint (ANI), 2026-10-13
  3. TARGET Instant Payment Settlement (TIPS). European Central Bank, 2026
  4. FedNow Service fee schedule, 2026. Federal Reserve Financial Services, 2026
  5. RTP network pricing, effective 1 January 2025. The Clearing House, 2025
  6. Paytm Q1 FY27 results. Paytm, 2026
  7. Paying with Bizum in physical shops (Spanish). elDiario.es, 2026
  8. StoneCo second-quarter 2026 earnings release. U.S. Securities and Exchange Commission, 2026

Written by Ghenadie Cernei, Founder, Finergy. .

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