Last month, the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, amending Section 10A of the Payment and Settlement Systems Act, 2007, the clause that has kept UPI free since 2020. The government moved to reassure the public that ordinary users and all peer-to-peer transfers will stay free; only a “threshold-based,” nominal Merchant Discount Rate (MDR) on large merchants is now finalised (0.4 per cent above Rs 2,000, capped at Rs 300 above Rs 75,000, effective October 15, all other transactions remain free).
However, this points to an issue that a decade of UPI triumphalism has never addressed: This system has made India’s informal workers extraordinarily visible to banks, lenders, the state and to the platforms that manage their labour, without making them correspondingly secure. Visibility, as it turns out, is not the same as voice. That gap is the actual story of UPI and the informal economy. Everything else — the MDR debate, the data harvested from transaction trails, the rise of platform work — is simply where that gap shows up. It is worth asking what UPI has actually done for the roughly nine in 10 Indian informal workers who use it, without a written contract, a provident fund, or a seat at any bargaining table.
The bargain
Over 2,300 crore transactions worth Rs 30 lakh crore were done with UPI in a single month this year. Around 60 million merchants accept digital UPI payments, of which 90 per cent have annual turnover below Rs 20 lakh. Set against this, among India’s informal, non-agricultural enterprises, the share of hired workers covered by the EPFO or ESIC remains a rounding error above zero. A worker who has been absorbed into a real-time national payments system is traceable and taxable, still has no pension, no enforceable minimum earning, and no institutional means of bargaining.
Indian policy has sought to offer digital access as a solution to problems that are distributive in nature. The JAM trinity — Jan Dhan, Aadhaar, mobile — was to deliver subsidies with less leakage. UPI extended that logic to everyday commerce by enabling a vegetable vendor not to worry about carrying cash, with payments settled in seconds rather than requiring a trip to a bank that takes hours. But this is not the same as securing income and financial inclusion. As operationalised in India, it has functioned as a substitute for the much harder political project of labour formalisation. Further, if read carefully, digital payments infrastructure is comparatively cheap to build and requires no confrontation with employers or fiscal constituencies.
The MDR episode also makes the trade-off legible: Someone has always been paying for UPI’s “free” status, namely banks and the exchequer via budgetary incentives to NPCI. That arrangement is now being renegotiated by banks and fintech companies, with the informal worker nowhere present in the process. Zero-MDR was central to UPI’s adoption by low-margin vendors who could never have absorbed the roughly 1 per cent fee once levied on card payments. The Payments Council of India has long argued this makes the rail commercially unsustainable for the players operating it. The threshold-based compromise, sparing small merchants, may sound reasonable. But the manner in which it was arrived at is concerning: A subsidy shaping a vendor’s daily commerce is redesigned without adequate consultation. The 22-member committee that decided the rate included banks and payment players but had no worker or vendor representative body.
The same asymmetry runs through what happens to the data a worker generates through transactions. A worker’s UPI trail has become the raw material for an entire private lending and “alternative credit scoring” industry, sitting atop a public rail, useful to someone who lacked collateral, but built with little meaningful consent. The same logic now governs platform work.
UPI-enabled instant settlement is what allowed gig and delivery platforms to scale from an estimated 7.7 million workers in 2020-21 toward a projected 23.5 million by 2029-30, absorbing labour squeezed out of agriculture and stagnant manufacturing. But it has done so by making these workers legally almost unclassifiable — employee or contractor — and by subjecting them to algorithmic discipline such as ratings and incentive structures, without any corresponding algorithmic right to contest a rating or know why an account was switched off. The nationwide gig-worker strike at the end of 2025 was a direct expression of workers who are constantly watched but who have no standing to answer back.
What a genuine developmental agenda would require
None of this is against digital payments infrastructure, which has lowered real transaction costs for people who needed exactly that. It is an argument against mistaking a payments rail for a labour policy. A serious agenda for informal and platform workers would require, at a minimum, social security attached to the worker, enforceable minimum earnings for gig and platform work, the “algorithmic wage” made auditable, and data rights that give workers real claim over the information their own transactions generate, including the ability to contest algorithmic and performance decisions. Also needed — something almost never discussed in DPI triumphalism — is some institutional channel for collective voice, since neither the Code on Social Security nor UPI itself gives informal workers any means of negotiating the terms on which they participate.
Until Indian policy treats this with priority, the “digital empowerment” of the informal worker will remain a useful but fairly one-sided achievement, where they have been made legible, trackable, and instantly payable, without being made secure.
The writer is an assistant professor in the Department of Economics, Easwari School of Liberal Arts, SRM University – AP
If the cost of carrying out an activity increases, the business doesn't normally just absorb that cost in silence; instead, it tends to pass it on by raising the price. 
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