The recent discussion paper by the RBI on charges in payment systems has triggered widespread public debate, especially on the zero-charge framework for UPI transactions. Many, including market players and the National Payments Corporation of India, have come out in support of moving away from the zero merchant discount rate (MDR), explaining how the lack of commercial compensation discourages new players from entering the market and deters investments in the upgradation of consumer protection and security. We add some more nuance to this debate, explaining key considerations and the approach to price regulation of UPI. [Read more…]