Paytm, Mobikwik Shares Rally Up To 7% After UPI MDR Charges Boost Digital Payments Revenue Outlook
Digital payments companies including Paytm and Mobikwik witnessed strong buying interest on Wednesday after the introduction of Merchant Discount Rate (MDR) charges on certain UPI transactions raised expectations of improved revenue visibility for the sector. Paytm shares gained 7% to touch a fresh 52-week high of ₹1,856.50 on the BSE, while Mobikwik rose 6% to ₹214. In contrast, Pine Labs…
On Wednesday, digital payment firms Paytm and Mobikwik experienced a surge in investor activity following the introduction of Merchant Discount Rate (MDR) charges for specific UPI transactions, which heightened prospects for enhanced revenue visibility within the sector. Paytm's shares soared 7%, reaching a new 52-week high of ₹1,856.50 on the BSE, while Mobikwik increased by 6% to ₹214. Pine Labs, however, witnessed a decline of 6%, trading at ₹182 per share.
The National Payments Corporation of India (NPCI) responsible for UPI unveiled that a 0.4% MDR would apply to person-to-merchant UPI payments exceeding ₹2,000 from October 15. This charge is capped at ₹300 for transactions totalling ₹75,000 or higher. Individual transactions, such as transfers among family and friends, will continue to be free of charge. Moreover, payments to merchants classified as P2PM (person-to-person merchant) will also not incur MDR fees.
App developers are prohibited from levying platform fees, and banks have been instructed not to pass on the MDR costs to customers. A fifth of the new fee pool will be allocated to support the expansion of small-merchant UPI services. Small merchants generating up to Rs 1 lakh monthly via UPI QR codes are entirely exempt from the new charge, a provision aimed at shielding 96% of merchant transactions from the fee.
Analysts argue that the MDR implementation establishes a more predictable revenue structure for digital payment companies. Jefferies highlighted that the levy exceeds the anticipated 25 basis points and could potentially expand the industry's revenue potential. Estimates suggest that Paytm could generate UPI MDR revenue of ₹11.2 billion by the fiscal year 2028, while Pine Labs could earn ₹1.55 billion under conservative assumptions.
The government's decision to end nearly six years of completely free UPI payments, delineating everyday person-to-person transactions and small payments from the charge, marks a significant shift in the digital payments landscape.
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