Amazon Pay ensures small players receive fair share for the value they contribute to the payment ecosystem by rolling out a merchant discount rate (MDR) for Unified Payments Interface transactions.

MDR refers to the fee charged to a merchant for processing payments.

The digital payments arm of the e-commerce giant is known for practicing fair value exchange between merchants and consumers or customers and banks.

Additionally the digital payments arm is attempting to bring in some level of MDR for UPI transactions as well.

MDR is said to already exist for credit cards on UPI or credit lines on UPI, Amazon Pay is brewing efforts to implement it for bank accounts to ensure everyone receives a fair share for the value they add to the ecosystem.

The digital payments arm believes that MDR must be fair and equitable to allow smooth adoption of digital payments without challenges.

The fintech industry has been voicing out the need for MDR in UPI transactions as it considers it crucial for long-term sustainability.

Some of the industry players even discussed implementing MDR for these transactions with the finance minister Nirmala Sitharaman earlier this year.

The Reserve Bank of India (RBI) proposed a structure change for UPI payments in different transaction amounts through the issuance of a discussion paper.

The finance minister reverted with a non-existence of proposal to impose charges on UPI transactions and the proposal has been held off since then.

Since Google Pay and PhonePe possess a larger part of the market in India with a collective share of 85 percent, bringing MDR fees could help make way for other fintech companies to acquire new customers and break the duopoly.

According to the analysis, which polled 1,000 retailers and over 6,000 consumers, 65 percent of transactions in India's small towns and 75 percent of transactions in the country's bigger cities are now digital.

Using more real-time variables, Amazon Pay aims to fight digital payment fraud while streamlining the consumer experience.