Two regulators, seven time zones apart, spent the first week of August rewriting the same rule in different words: nothing that moves money or data stays free forever.
In New Delhi, Parliament amended the law that has kept UPI transactions free of merchant charges since 2020. In Washington, the Consumer Financial Protection Bureau sent a rewritten open banking rule to the White House that would let banks charge fintechs for the account data those fintechs depend on. Neither move sets a price yet. Both open the door to one.
India ends a six-year free ride, without setting a price
On August 4, Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha. Buried inside it was an amendment to Section 10A of the Payment and Settlement Systems Act, 2007. That is the provision that has barred banks and payment operators from charging a Merchant Discount Rate (MDR) on UPI and RuPay debit card transactions since January 2020. The Lok Sabha passed the bill on August 6, according to BusinessToday's reporting on the session.
The amendment does not itself impose a fee. It replaces a blanket statutory prohibition with a framework in which the central government can notify, by executive order, which payment instruments stay exempt from MDR and which do not. The finance ministry told reporters that a majority of UPI transactions will remain free and that any rate, merchant category or transaction threshold would be worked out separately by an NPCI-led steering committee, not set in the bill itself.
The timing matters. The bill passed one day after the Reserve Bank of India's Monetary Policy Committee held the repo rate at 5.25% and kept a neutral stance. Asked about UPI fees at the post-policy press conference on August 5, Governor Sanjay Malhotra declined to commit to a number but did not dodge the underlying economics either. Costs have to be paid by someone, he said, according to Business Standard's account of the briefing, and consumers may already be absorbing them indirectly through the wider economy rather than seeing them on screen. He called it premature to say more.
The scale explains why this is being litigated at all. UPI processed 23.2 billion transactions worth roughly Rs 29.9 lakh crore in May 2026 alone, per NPCI data reported by multiple outlets including ANI. A system running at that volume without a merchant fee has been subsidized somewhere, whether by banks absorbing switching costs, by the government's incentive scheme for low-value transactions, or by card networks losing share to a zero-cost rail. The amendment does not end that subsidy. It gives the government the legal room to decide, transaction category by transaction category, where the subsidy stops.
Washington asks the inverse question: who pays for data
The CFPB's move looks different on the surface but rests on the same fault line. In early August, the bureau submitted a Notice of Proposed Rulemaking, titled Personal Financial Data Rights Reconsideration, to the Office of Information and Regulatory Affairs for review under Executive Order 12866. That review is a required step before the text is published in the Federal Register for public comment, as Consumer Finance Monitor and other legal trackers reported.
The filing reopens the Section 1033 "open banking" rule finalized under the Biden administration in October 2024, which required banks to share consumer account data with fintechs and data aggregators at no charge, upon customer request. Coverage from PYMNTS and American Banker indicates the revised proposal would let banks charge fees to the fintechs and aggregators pulling that data through their APIs, reversing the free-access position fintechs had favored in the original rule.
The alignment with India's bill is not that the two rules do the same thing. It is that both regulators are being asked to decide, in the same month, whether a payment or data rail that had been mandated as free can keep functioning without a mechanism for someone in the chain to get paid. India's answer, so far, is a legal opening with the pricing decision deferred to a steering committee. The CFPB's answer, so far, is a fee structure that shifts cost from banks toward the fintechs that built businesses on free access.
What this changes for embedded finance and lending, and what it does not
Neither rule is final. India's bill amends the law but sets no rate, and the NPCI committee process has no published timeline as of this writing. The CFPB's proposal has not yet been published for comment, let alone finalized, and American Banker's reporting flags that a fee-based rewrite is likely to draw legal challenges from consumer advocates who backed the original rule.
What is already clear is the direction. Embedded lending and embedded payment products, the ones that route a checkout, a payroll advance or a BNPL decision through a UPI rail or a bank-data API, have been built on the assumption that the rail underneath them is free. That assumption is now explicitly under government review in both of the world's largest digital payments markets. A fintech pricing a lending product against a zero-cost data feed, or a merchant integration priced against a zero-MDR UPI rail, is pricing against an assumption that two regulators have just put on the table for revision.
Neither government has said what it will cost. That is the part worth watching, not the part that has been decided.
Sources
- Business Standard, "'Someone has to pay': RBI Governor on proposal to levy MDR on UPI payment" (Aug 5, 2026) - https://www.business-standard.com/economy/news/rbi-governor-upi-mdr-merchant-fee-someone-has-to-pay-126080500833_1.html
- BusinessToday, "Lok Sabha passes tax Bill that could end UPI's free transaction model for merchants" (Aug 7, 2026) - https://www.businesstoday.in/india/story/lok-sabha-passes-tax-bill-that-could-end-upis-free-transaction-model-for-merchants-rules-eased-for-data-centres-547817-2026-08-07
- TechTimes, "India Opens Door to UPI Merchant Fees as Parliament Amends Six-Year Zero-MDR Law" (Aug 4, 2026) - https://www.techtimes.com/articles/322958/20260804/india-opens-door-upi-merchant-fees-parliament-amends-six-year-zero-mdr-law.htm
- Zeebiz, RBI MPC review coverage, August 5, 2026 - https://www.zeebiz.com/economy-infra/live-updates-rbi-mpc-august-5-2026-review-live-updates-repo-rate-decision-loan-emi-impact-gdp-inflation-cpi-forecast-sanjay-malhotra-speech-highlights-399917
- ANI News, "UPI Hits new high in May 2026 with 23.2 billion transactions worth Rs 29.9 Trillion, NPCI Data Shows" - https://www.aninews.in/news/business/upi-hits-new-high-in-may-2026-with-232-billion-transactions-worth-rs-299-trillion-npci-data-shows20260602155337/
- Consumer Finance Monitor, "CFPB Sends New Section 1033 'Open Banking' Proposal to OIRA for Review" (Aug 6, 2026) - https://www.consumerfinancemonitor.com/2026/08/06/cfpb-sends-new-section-1033-open-banking-proposal-to-oira-for-review/
- PYMNTS, "CFPB Open Banking Rewrite Could Put Data-Access Fees at Center of Section 1033 Fight" - https://www.pymnts.com/legal/bank-regulation/2026/cfpb-open-banking-rewrite-could-put-data-access-fees-at-center-of-section-1033-fight/
- American Banker, "What we know about the CFPB's forthcoming open-banking rule" - https://www.americanbanker.com/news/what-we-know-about-the-cfpbs-forthcoming-open-banking-rule