UPI’s zero-fee scale pushes banks toward lending, merchant services and data revenue
McKinsey says UPI now handles more than 19 billion monthly transactions—nearly one-third of India’s transaction volume—pressuring payment-fee economics. Banks and fintechs are increasingly targeting lending, insurance, merchant solutions, advertising and analytics for monetisation.
What happened
Unified Payments Interface (UPI) · McKinsey says UPI’s scale and zero-fee model are pressuring traditional payment revenues, driving Indian banks and fintechs
Key facts
- More than 19 billion UPI transactions per month
- Nearly one-third of India's total transaction volume
Why this matters
Banks and fintechs should pursue partnerships or acquisitions that add merchant software, embedded-credit capabilities, consented data assets and insurance distribution rather than standalone payment-processing scale.
What to watch
- Changes to UPI incentive subsidies, MDR policy or payment-service pricing rules.
- Growth in UPI credit products, credit-on-UPI adoption and merchant loan disbursals tied to payment histories.
- RBI rules on account aggregators, data sharing, digital lending and consented transaction-data use.
- Merchant adoption of UPI-linked POS, inventory, billing and loyalty products.
- Rising retail-media revenue or sponsored-offer activity within payment and commerce apps.
- Consolidation, exits or funding stress among standalone payment aggregators and fintechs.
- Prioritise UPI-linked merchant acquiring where it creates proprietary purchase and cash-flow data, not merely payment volume.
- Bundle checkout acceptance with settlement tools, inventory software, loyalty, supplier payments and pre-qualified working-capital offers.
- Build explicit customer consent and data-governance architecture for transaction-informed targeting, credit and insurance cross-sell.
- Track merchant economics by lifetime value across lending, software, media and financial products rather than payment take rate.
- Prepare partnerships with banks, NBFCs and insurers to avoid carrying credit risk while retaining merchant distribution and data advantages.