Short answer: A merchant displays a provider-configured UPI QR code, the customer scans it in a UPI-enabled app, verifies the payee and amount, and authorizes the payment. Payment-system participants process the instruction, after which the merchant confirms the credit in its own app, bank account or provider dashboard. Section 10A of India’s Payment and Settlement Systems Act bars a bank or system provider from imposing a charge on a person making or receiving a payment through electronic modes prescribed under section 269SU of the Income-tax Act. That rule does not, by itself, promise that every separately contracted device, software integration, rental, subscription or other merchant service is free.
What a merchant UPI payment is
The National Payments Corporation of India (NPCI) classifies person-to-merchant payments as P2M. A QR code is one recognized way to start that payment, although a merchant’s acceptance arrangement can also use other supported interfaces. The QR must be a valid merchant QR configured by the merchant’s bank, acquirer or payment provider; a generic printed code is not a substitute for onboarding.
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In a normal in-person sale, the QR identifies the merchant or its payment arrangement. The customer’s UPI app retrieves the payee details, displays the amount (or asks the customer to enter it), and requests authorization. The merchant should rely on its own confirmation channel—not only a customer’s screenshot or a spoken claim—before treating the sale as paid.
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1. The merchant presents a configured QR
The merchant displays the QR supplied or configured by its acceptance provider. It may be on a counter stand, invoice, screen or another approved surface. A QR standee is an optional display accessory; the essential requirement is a valid merchant QR linked to the merchant’s account or provider profile.
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2. The customer scans and checks the payment details
The customer opens a UPI-enabled app and scans the code, or otherwise initiates a supported P2M payment. Before authorizing, the customer should check the payee name and amount shown by the app. If the name is unexpected, the customer should stop and ask the merchant to verify the code.
3. The customer authorizes the instruction
The customer confirms the payment using the authentication method required by the UPI app and bank. The authorization is an instruction to the participating payment-system entities; it is not proof that the merchant’s account has already been credited.
4. Participants process the instruction
Banks, payment-system participants and the merchant’s acceptance provider process and communicate the transaction status. The precise screens, notifications, retries and exception handling vary by app, bank and acceptance setup, so there is no single interface that every merchant or customer will see.
5. The merchant verifies receipt
Check the provider’s merchant app, bank account or reconciliation dashboard for a successful credit. Match the amount, reference and order or invoice details before releasing goods or marking the invoice paid. A customer-side “successful” screen can be useful evidence, but the merchant’s own confirmation is the safer operational control.
6. Settlement and reconciliation follow the provider arrangement
“Payment authorized” and “money available in the merchant’s settlement account” are related but not necessarily identical events. Settlement timing depends on the bank, acquirer, merchant category, contract and exceptions. NPCI material does not establish one universal settlement time for every UPI acquiring setup. The merchant should use the written settlement schedule and its provider’s status and reconciliation tools.
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What does each UPI transaction cost?
There are two different questions hidden in “cost”: whether the payment itself may be charged, and whether the merchant pays for optional services around acceptance.
The statutory no-charge rule
Section 10A of the Payment and Settlement Systems Act, 2007 states:
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“no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment prescribed under section 269SU of the Income-tax Act, 1961”.
The provision is tied to the electronic modes prescribed under section 269SU. It addresses a charge imposed by a bank or system provider on the person making or receiving such a payment. It should not be rewritten as a guarantee that every commercial service used by a merchant around UPI acceptance has a zero price.
Services that require a separate contract check
A merchant should ask its bank or provider for written, current terms covering the whole arrangement. The following are quote-checking categories, not claims that every provider charges each one:
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- Any payment-related charge and the legal or contractual basis for it.
- Fixed monthly subscriptions, account fees or minimum commitments.
- Terminal, soundbox or other device rental, purchase and replacement terms.
- QR printing, display materials or other hardware supply.
- API, checkout, invoicing, accounting or point-of-sale integration fees.
- Settlement timing, cut-off times and treatment of weekends or exceptions.
- Refund, reversal, failed-payment and dispute procedures.
- Reconciliation reports, exports, support and account-closure terms.
- Applicable taxes shown on the provider’s invoice or schedule.
Keep the accepted terms and tariff version with the merchant’s records. If a provider proposes a charge that appears to apply to the payment itself, ask it to identify the relevant statutory and contractual basis rather than assuming a historical MDR number is current.
Historical MDR figures: useful context, not today’s price list
NPCI’s 30 August 2019 BHIM UPI release described planned changes for that period. It said BHIM UPI MDR would be revised to 0.30%, capped at ₹100 per transaction, and that offline merchant QR transactions up to ₹100 would have zero MDR from 1 October 2019. The release also discussed historical monthly inward-transaction limits for the P2PM (small-merchant) category.
Those are dated 2019 policy details. They are not a defensible universal merchant tariff for 2026. Section 10A of the Payment and Settlement Systems Act took effect on 1 November 2019, so a current explanation should start with the statute and the merchant’s present written terms, not present the 2019 announcement as an active price schedule.
| Figure or rule | What it actually describes | How to use it |
|---|---|---|
| 0.30% MDR, maximum ₹100 | Planned BHIM UPI MDR described by NPCI on 30 August 2019 | Historical context only; do not quote as a current universal rate |
| Zero MDR up to ₹100 for offline merchant QR | NPCI’s stated plan from 1 October 2019 | Historical, transaction-condition-specific information |
| Section 10A no-charge wording | Statutory restriction on a bank or system provider charging a person making or receiving a payment through prescribed modes | Use with the prescribed-mode qualification; do not extend automatically to optional services |
What settlement timing means for a merchant
Merchants often ask, “When will the merchant receive the money after a UPI transaction?” There is no single answer that applies to every bank, acquirer, merchant category or exception. A provider may show a successful transaction immediately while its contractual settlement process credits a designated account later, or it may route funds according to a schedule the merchant accepted.
Read the provider’s written terms for:
- the account that receives settlement;
- normal settlement windows and cut-off times;
- holidays, maintenance and exception handling;
- how partial, duplicate, reversed or disputed transactions appear;
- the reference number used to match a sale with a bank statement; and
- the escalation route when the customer is debited but the merchant cannot see a credit.
NPCI’s Pay by Points FAQ gives a narrower example in which merchants receive the full transaction amount under that feature’s standard settlement process. That example should not be generalized into a settlement guarantee for all UPI acquiring arrangements.
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A practical onboarding and acceptance checklist
Before displaying the QR
- Complete merchant onboarding with the chosen bank, acquirer or payment provider.
- Confirm the legal merchant name, settlement account and authorized contact details.
- Obtain the provider-configured merchant QR and test that it resolves to the correct payee.
- Read the current written terms for charges, hardware, settlement, refunds, disputes and taxes.
- Decide where the QR will be visible without allowing it to be replaced or altered unnoticed.
For every sale
- Enter or display the exact amount required by the accepted checkout method.
- Ask the customer to verify the payee name before authorization.
- Wait for the customer’s authorization to complete.
- Check the merchant app, bank account or provider dashboard for the transaction.
- Match the amount and reference to the order, then issue the receipt or release the goods.
At the end of a shift or business day
- Export or record the provider’s transaction list where the contract permits.
- Match successful entries to orders, refunds and the settlement account.
- Investigate entries marked pending, failed, reversed or disputed instead of counting them as paid.
- Retain the references needed by the provider’s support or dispute process.
Common failure modes and safe responses
The customer shows a screenshot but the merchant sees no credit
Do not treat the screenshot as final settlement evidence. Check the merchant-side status and account, verify the reference and follow the provider’s pending-payment procedure. Avoid asking the customer to pay repeatedly until the first attempt’s status is clear, because a delayed transaction can create a duplicate payment.
The QR displays the wrong merchant name
Stop accepting through that code. A wrong payee name can indicate a misplaced, replaced or misconfigured QR. Contact the issuing provider and display only a corrected merchant QR.
The amount is wrong
Cancel or correct the transaction using the provider’s documented process. For a customer who has already authorized an incorrect amount, use the formal refund or reversal route; do not promise an instant outcome unless the provider’s terms support it.
The merchant cannot reconcile a successful payment
Use the transaction reference, date, amount and order identifier to search the merchant dashboard and settlement statement. If the records still disagree, open a support case through the provider’s stated channel and preserve the customer’s receipt details.
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Request the tariff or contract clause in writing, identify whether it concerns the payment or an optional service, and check the effective date and taxes. The statutory rule and a provider’s separate service pricing should be analyzed as distinct questions.
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How to compare merchant acceptance providers
There is no current official provider-by-provider quote matrix established here. A fair comparison uses like-for-like written terms rather than a headline “UPI is free” claim.
| Comparison point | Question to ask |
|---|---|
| Payment charge | Is any charge imposed on the payment itself, and what is its legal and contractual basis? |
| Fixed cost | Is there a recurring subscription, minimum commitment or account fee? |
| Hardware and QR | Who supplies the QR, stand, device or replacement, and on what terms? |
| Settlement | Which account receives funds, on what schedule, and how are exceptions handled? |
| Refunds and disputes | Who starts the process, what evidence is required and how are reversals shown? |
| Reconciliation | Can the merchant search, export and match references to orders and statements? |
| Taxes and support | Which taxes appear on invoices, and what support channel and response terms apply? |
How large the system is (and what that number does not prove)
NPCI reported 12,705.16 million P2M transactions valued at ₹7,23,797.42 crore for August 2025. This is a dated system-activity statistic. It is not a forecast, a merchant’s expected volume, a settlement-time promise or a fee figure.
Bottom line for merchants
Use a valid provider-configured QR, verify every receipt through the merchant’s own channel, and reconcile transactions against the settlement account. Treat section 10A’s no-charge wording as a statutory rule for prescribed electronic modes and the persons making or receiving those payments—not as proof that every optional acceptance service is free. For the actual cost of your setup, rely on the current written terms covering payment charges, devices, subscriptions, integrations, settlement, refunds, disputes and taxes. Treat the 2019 MDR figures as historical context only.
Frequently Asked Questions
Is every UPI merchant transaction free?
The statutory rule in section 10A bars a bank or system provider from imposing a charge on a person making or receiving a payment through electronic modes prescribed under section 269SU. Separate merchant services—such as devices, subscriptions or integrations—must be checked in the provider’s current written terms.
Can a merchant rely on a customer’s successful-payment screenshot?
No. The merchant should verify the credit in its own app, bank account or provider dashboard and match the amount and reference before treating the sale as paid.
What was the 0.30% UPI MDR figure?
NPCI described 0.30% with a ₹100 cap in a 30 August 2019 BHIM UPI release. It is historical information, not a current universal merchant tariff.
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