The UPI Shake-Up Begins
A customer scans a QR code at a neighbourhood shop, enters a passcode and the payment is done. Similarly, a…
India’s digital payments landscape is undergoing a significant shift with the introduction of a 0.4% merchant discount rate (MDR) for select high-value UPI transactions above ₹2,000, effective October 15. This new framework aims to monetize the previously mostly free UPI payments ecosystem, which has grown to process 24.51 billion transactions worth ₹29.82 lakh crore in a single month.
While the government states that around 96% of person-to-merchant (P2M) UPI transactions will remain unaffected, merchants and retailers are expressing concerns about the impact on their margins. Some have threatened to stop accepting UPI payments above ₹2,000 unless exempted. The shift away from free payments has sparked debate over who will benefit from the new MDR revenue pool.
Banks and UPI handles are estimated to capture around 60% of the annual monetary benefits, followed by UPI app providers at 25% and non-bank payment aggregators at 15%. Notable lenders such as Yes Bank, Bank of Baroda, Punjab National Bank, and IndusInd Bank could potentially see a 6-12% increase in gross profit from the new MDR.
Payment app providers, while benefiting from a minority share of the pool, could still secure a meaningful revenue stream. Additionally, card networks like Visa and Mastercard may gain more attractive economics for higher-value transactions, potentially affecting the future of payment methods in India.
Written by urgent.news from Inc42's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
