UPI’s fee ride could become a ₹22,000 cr pool

Mumbai, India's leading payment ecosystem UPI could generate an estimated ₹22,000 crore in annual revenue by 2028 if a 40-basis-point Merchant Discount Rate (MDR) is imposed on half of the transaction value, according to Bernstein estimates. This presents a significant monetisation opportunity for the payments sector, which has thus far operated without merchant fees.

Bernstein estimates that banks could earn around Rs 14,000 crore from this pool, with payment apps earning approximately Rs 7,000 crore, depending on regulatory allocations and commercial agreements between apps and their partner banks. The estimates assume that UPI transactions of up to Rs 2,000 and debit-card transactions routed through RuPay cannot be charged, while transactions above Rs 2,000 fall outside the specified zero-charge category.

Transactions above Rs 2,000 make up about 4% of UPI transaction volumes but account for nearly 70% of transaction value, making them a prime target for monetisation without disrupting everyday payments. Bernstein believes a 30-40 bps MDR on 50% of UPI transaction value by FY28 is most likely.