- Merchant discount rate (MDR) on UPI transactions above Rs 2,000 starts October 15 in India
- MDR expected to generate up to $1.1 billion annually for payment apps by March 2028
- PhonePe and Google Pay could capture around $900 million of additional revenue together
The new fee, called the merchant discount rate (MDR), is expected to generate annual revenue of up to $1.1 billion for payment apps by March 2028, according to estimates by brokerage Bernstein.
That would mean PhonePe and Google Pay could together account for around $900 million of the additional revenue, based on their current market share.
The potential windfall comes as India prepares to introduce a 0.4% merchant fee on UPI transactions above Rs 2,000 from October 15, ending a six-year period in which the digital payments network operated without a merchant fee.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
ALSO READ | Four Of 11 Automakers Have Outperformed Since The GST Cut — Here's What's Next
Walmart-backed PhonePe and Google Pay currently dominate the UPI ecosystem, accounting for around 80% of transaction value in the previous month.
The new revenue stream could strengthen their ability to invest in distribution, technology and expansion, particularly in smaller towns and rural markets.
Industry sources said the economics of serving rural customers could become more attractive for the two leading platforms, where individual transactions are generally smaller but payment data can support other financial services, including lending.
The move, however, could intensify concerns about concentration in India's digital payments market.
The National Payments Corporation of India (NPCI), which operates UPI, has twice deferred a decision on imposing a 30% market share cap on individual payment apps.
Smaller players are expected to focus on higher-value transactions such as ticket bookings, utility payments and business transactions to improve their revenue potential.
ALSO READ | ‘Neither Tax, Nor Cess': FM Nirmala Sitharaman Slams Opposition Over Misinformation On UPI MDR
They could also expand credit and other financial products linked to UPI.
MobiKwik co-founder Bipin Preet Singh said the MDR could provide payment companies with a stronger commercial rationale to continue investing in the UPI ecosystem.
The new fee is also raising concerns that merchants could indirectly pass the cost on to consumers.
However, retailers and industry executives cited in the report said a significant shift back to cash was unlikely, given consumers' growing reliance on UPI for everyday payments.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
