Proposed UPI merchant fee could unlock ₹13,500–16,000 crore for payment apps and banks
A proposed 25–30 bps merchant discount rate on UPI payments could create a new annual revenue pool for PhonePe, Google Pay, Paytm and banks. The plan remains subject to government notification, merchant thresholds and NPCI’s revenue-sharing formula.
What happened
A proposed 25-30 bps UPI merchant fee could create ₹13,500-16,000 crore in annual payments revenue, benefiting PhonePe, Google Pay, Paytm and banks.
Key facts
- 25-30 bps proposed MDR
- ₹13,500 crore annual ecosystem revenue at 25 bps
- Nearly ₹16,000 crore annual ecosystem revenue at 30 bps
- PhonePe and Paytm: around ₹700 crore annual revenue each
- Google Pay: around ₹500 crore annual revenue
- SBI: up to ₹3,000 crore annually
- Bank of Baroda and HDFC Bank: around ₹800 crore each annually
- Union Bank, Canara Bank and PNB: nearly ₹700 crore annually
- Merchant transactions account for around 64% of UPI transactions
- More than 23 billion monthly UPI transactions
- Nearly ₹30 lakh crore monthly UPI transaction value
Why this matters
The potential fee pool could accelerate partnerships, distribution deals and consolidation around UPI acquiring, merchant software and bank-payment app revenue-sharing.
What to watch
- Formal Ministry of Finance, RBI or NPCI notification specifying whether MDR is permitted and its implementation date.
- Merchant eligibility thresholds by annual turnover, transaction value, merchant category or payment instrument.
- NPCI revenue-sharing formula among issuer banks, acquiring banks, TPAPs, PSPs and QR/merchant acquirers.
- Whether the government replaces existing UPI incentive subsidies with MDR revenue or continues both during a transition.
- Responses from merchant bodies, e-commerce platforms, quick-commerce firms and kirana associations.
- Changes in UPI transaction growth, merchant acceptance expansion, average ticket size and payment-method steering after any pilot.
- RBI guidance on consumer surcharging, merchant disclosure and pricing caps.
- Payment apps and banks will lobby for a revenue-sharing formula that rewards transaction origination, merchant acquisition and fraud-control investment.
- Large merchant aggregators, e-commerce platforms and QR acquirers will renegotiate commercial agreements and build MDR pass-through or absorption strategies.
- Apps will prioritize enterprise merchant acquisition, higher-ticket categories, subscription collections, credit-on-UPI and loyalty products where fee economics are strongest.
- Merchants may introduce minimum-order thresholds, payment-method steering or selective UPI acceptance if costs are not offset by higher conversion and lower cash handling.
- Competitors in cards, wallets and account-to-account payment products will reposition pricing to capture merchants sensitive to a new UPI acceptance cost.