India’s instant payments system didn’t just change how people pay — it rewired how merchants get paid. Here’s how UPI turned acquiring upside down, and what it means for you.
From card terminals to QR rails
If you run a café, store, or delivery business in India, chances are your main payment “terminal” is no longer a POS machine — it’s a QR code. Unified Payments Interface (UPI), launched by the National Payments Corporation of India (NPCI) in 2016, has turned merchant acquiring from a hardware-led to a software-driven business.
Before UPI, acquiring meant card networks, terminals, MDRs (merchant discount rates), and settlement delays. Today, onboarding a merchant often takes minutes, not weeks. A single virtual payment address replaces the card rails and acquirer host.
That shift didn’t just lower costs; it redefined who counts as an acquirer.
The new acquiring stack: PSPs instead of acquirers
In the card world, the acquirer was a licensed bank. In the UPI world, that role is split among Payment Service Providers (PSPs) — licensed banks and fintech partners that issue merchant handles and connect to UPI rails.
Instead of leasing terminals, PSPs offer QR onboarding kits, mini-apps, and dashboards. Settlement still flows through banks, but the merchant’s experience is managed by apps like PhonePe, Paytm, BharatPe, or Razorpay.
According to NPCI data, over 450 million UPI QR codes are live across India as of mid-2025, spanning everything from kirana shops to online platforms.
Cost, trust, and visibility — the real merchant wins
For small merchants, UPI cut the traditional acquiring costs almost to zero. No monthly terminal fees, no MDR on person-to-merchant payments (for most use cases), and instant settlement for many wallets and banks.
But perhaps the bigger win is visibility. QR acceptance opened digital trails for millions of cash-only businesses. That data feeds credit scoring, loyalty programs, and GST compliance — giving small retailers access to formal finance they never had.
Even large retailers see value in UPI beyond cost. Instant refunds, order-linked QR payments, and dynamic codes for e-commerce now rival card authorization flows in speed and reliability.
What changed behind the scenes
UPI’s design pushed banks to open APIs and build real-time settlement infrastructure — effectively making them national acquirers by default. Fintechs built layers on top: reconciliation tools, analytics dashboards, and hybrid acceptance apps that combine UPI, cards, and EMI options in one screen.
If you’re a merchant today, your acquiring partner might not even hold your funds — it orchestrates them. That’s a major shift from the traditional “merchant account” model.
The next phase: credit and cross-border
The next wave of acquiring innovation rides on UPI Credit and cross-border QR. UPI-linked credit lines, now piloted by major banks, bring revolving credit to small merchants within the same acceptance flow.
Meanwhile, India’s tie-ups with Singapore, UAE, and Nepal enable tourists to pay Indian merchants directly in rupees via their home apps. For merchants, that means new spend without new infrastructure.
As one Bengaluru retailer put it, “We went from waiting for card settlements to seeing money hit in seconds — and now foreigners scan the same QR.”
What to expect next
Industry commentary suggests UPI will keep expanding into offline-plus-online convergence, recurring payments, and merchant credit scoring. PSPs are becoming more like full-stack merchant platforms, blending payment acceptance with analytics, loans, and inventory tools.
For merchants, the message is simple: your acquiring relationship is no longer about terminals, but about data and ecosystem fit.
Facts are based on NPCI data, company statements, and industry reporting; accuracy checked as of 11 Oct 2025.