PhonePe, Paytm, and MobiKwik have expressed support for the introduction of a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions above Rs 2,000, effective October 15, 2026. The MDR will be set at 0.4% on person-to-merchant (P2M) transactions exceeding Rs 2,000, capped at Rs 300 for transactions of Rs 75,000 and above. Transactions up to Rs 2,000 and person-to-person (P2P) transfers will remain exempt from this charge, according to medianama.com.
Upasana Taku, co-founder and CEO of MobiKwik, told Business Today Television that payment companies have absorbed the cost of UPI transactions for years without earning revenue from transactions after the government introduced MDR. Sameer Nigam, co-founder and CEO of PhonePe, told CNN-News18 that the scale of UPI has created costs the industry can no longer absorb indefinitely. He highlighted expenses related to cybersecurity, fraud, chargebacks, KYC, and compliance as factors driving the need for a sustainable revenue model. The industry has been lobbying for such a model to support growth ambitions, aiming to expand UPI usage to a billion Indians.
The introduction of MDR on higher-value UPI transactions marks a shift in the payment ecosystem's economics, aiming to create a sustainable business model for payment companies. The fee structure balances the need to support the payment infrastructure while exempting smaller transactions and P2P transfers to protect users. This move aligns with the sector’s growth trajectory and increasing operational costs, differentiating it from earlier phases when payment firms operated without transaction revenue. The capped MDR on large transactions and flat fees on specific categories like fuel and insurance further tailor the policy to market realities.
The MDR policy will take effect from October 15, 2026, with a 0.4% fee on P2M transactions above Rs 2,000 and a cap of Rs 300 on transactions of Rs 75,000 and above, as detailed by medianama.com.