UPI MDR could unlock ₹27,000 crore annual payments pool by FY28: Bernstein
Bernstein estimates a proposed 40-bps MDR on eligible UPI merchant payments could create a ₹27,000-crore annual revenue pool by FY28. Exemptions for sub-₹2,000 transactions and concessional categories would bring the effective blended MDR to about 19 bps.
What happened
Bernstein estimates a 40-bps MDR on eligible UPI merchant payments could create a Rs 27,000-crore annual revenue pool by FY28. Exemptions and concessional
Key facts
- 40 bps proposed MDR on eligible UPI merchant transactions
- Rs 27,000 crore estimated annual revenue pool by FY28
- Rs 10,800 crore potential issuing-bank share
- Rs 5,400 crore potential consumer-facing UPI-app share
- Rs 2,700 crore potential payer PSP-bank share
- Rs 5,400-6,800 crore potential merchant-app share
- Rs 1,400-2,700 crore potential acquiring-bank share
- UPI P2M value projected to rise from Rs 100 lakh crore to Rs 144 lakh crore by FY28
- 19 bps estimated effective blended MDR
- Transactions below Rs 2,000 remain free
- 33% of P2M transaction value is below Rs 2,000
- Only about 40% of P2M value would face the full 40-bps MDR
- Rs 5 flat fee for eligible transactions in specified categories
- 2 bps MDR for capital-market payments
Why this matters
Retailers and payments platforms should reassess issuer-bank, acquirer and UPI partnerships as MDR economics could reshape incentives around merchant acquisition, loyalty-linked payments and transaction routing.
What to watch
- NPCI, RBI, Ministry of Finance or government consultation language on MDR, transaction-value thresholds and merchant-category exemptions.
- Whether the ₹2,000 exemption applies per transaction, per merchant category, or only to specified small merchants.
- Final allocation of MDR among issuers, acquirers, PSPs and network participants.
- Any prohibition or limitation on merchant surcharging, differential pricing or payment-rail steering.
- Changes in government UPI incentive subsidies and budget allocations.
- Large retailers' disclosed payment-acceptance costs, revised checkout policies or bank-funded UPI campaigns.
- UPI average ticket-size trends, especially in grocery, fuel, electronics, fashion and omnichannel retail.
- Model UPI acceptance cost by ticket band, category and store format; isolate exposure above the proposed ₹2,000 exemption threshold.
- Negotiate enterprise MDR caps, volume rebates and co-funded offers with acquiring banks, PSPs and card networks before any rule takes effect.
- Build payment-routing capability that can steer eligible transactions toward the lowest-cost rail without degrading UPI conversion.
- Review whether loyalty rewards, instant discounts and bank partnerships can offset MDR for high-frequency or low-margin categories.
- Avoid overt consumer surcharging assumptions; prepare internal margin-recovery options through assortment, basket thresholds and targeted promotions.
- Track issuer-bank partnership opportunities, as banks receiving the largest revenue share may increase merchant-funded acquisition and offer budgets.