UPI MDR on higher-value payments could create ₹22,000 crore annual pool by FY28: Bernstein
Bernstein estimates a 40-bps MDR on half of UPI transaction value could generate ₹22,000 crore annually by FY28. Merchant payments above ₹2,000—just 4% of volume but nearly 70% of value—are the likely monetisation target, subject to regulatory approval.
What happened
Bernstein estimates a potential Rs 22,000-crore annual UPI MDR revenue pool by FY28 if a 40-bps fee applies to half of transaction value. Higher-value merchant
Key facts
- Rs 22,000 crore annual revenue pool by FY28
- 40 basis points MDR on 50% of UPI transaction value
- Rs 14,000 crore potential bank revenue
- Rs 7,000 crore potential payment-app revenue
- UPI transactions up to Rs 2,000 remain zero-charge
- Transactions above Rs 2,000 are 4% of volume and nearly 70% of value
- Potential MDR range of 30-40 bps
- UPI accounts for about 78% of person-to-merchant payment value
- UPI merchant transaction value grew 27% year-on-year in the June quarter
Why this matters
The prospect of UPI monetisation strengthens the rationale for acquiring or partnering with payment gateways, merchant-acquiring platforms and high-value merchant networks ahead of any MDR rollout.
What to watch
- RBI, NPCI, Ministry of Finance, or Parliament consultation language on UPI pricing, subsidy, or merchant discount rates.
- Any threshold-based MDR pilot targeting transactions above ₹2,000 or specific merchant categories.
- Changes in the UPI incentive scheme, including reduced government reimbursement for zero-MDR acceptance.
- Merchant association reactions, especially from e-commerce, electronics, travel, jewellery, fuel, and large-format retail.
- Acquirer and PSP disclosures showing higher merchant monetisation, take-rate expansion, or increased enterprise-payment revenue.
- UPI value-share trends for transactions above ₹2,000 and evidence of merchant payment-method steering.
- Large retailers should model 20-40 bps incremental cost on UPI transactions above ₹2,000 and compare it with card MDR, cash handling, and payment-gateway costs.
- Retailers should renegotiate acquiring contracts now, seeking volume-based caps, blended MDR rates, and routing flexibility across UPI, cards, and bank transfers.
- Payment firms are likely to prioritize enterprise merchant acquisition, high-AOV categories, recurring collections, and value-added software where monetisation is most defensible.
- Retailers may steer large-ticket purchases toward lower-cost rails, bank transfer, co-branded cards, EMI, or loyalty-linked payment methods if MDR is introduced.
- Fintechs and banks may accelerate UPI-linked credit, merchant lending, and checkout products to capture economics even if direct MDR remains constrained.