CONNECT WITH US
Fintech

Fintech

Can UPI become commercially self-sustaining with MDR?

ET BFSI Fintech logo

Published on

Add as a preferred source on Google
Can UPI become commercially self-sustaining with MDR?

A new MDR on high-value merchant payments will create a sizeable revenue pool, but current estimates suggest it may not be enough to cover the full cost of running India's UPI ecosystem.

About 96% of P2M transactions will remain outside the MDR framework, while P2P payments will continue to be free. Around 80% of MDR value is expected to come from businesses with annual digital payment collections above Rs 1,000 crore. The Rs 2,000 crore FY27 government incentive will continue supporting low-value UPI and RuPay transactions.UPI is moving towards a hybrid model, with high-value merchant payments generating revenue while low-value transactions continue to receive government support.

The new Merchant Discount Rate on high-value UPI merchant payments is expected to generate Rs 13,000-15,000 crore in its first year, covering about 62-71% of the payment system's estimated annual cost of around Rs 21,000 crore. The revenue will reduce the gap between the cost of operating UPI and the income generated by the ecosystem, but will not make the payment system fully self-sustaining through MDR. From October 15, a 0.4% MDR will apply to specified person-to-merchant UPI transactions above Rs 2,000, subject to a maximum charge of Rs 300 for transactions of Rs 75,000 and above. About 96% of P2M transactions will remain outside the MDR framework, while person-to-person transactions will continue to be free. Advt

The National Payments Corporation of India expects the new MDR framework to generate Rs 13,000-15,000 crore in the first year against an estimated annual UPI infrastructure cost of about Rs 21,000 crore.


Source link
Related Topics:Fintech

Disclaimer

We strive to uphold the highest ethical standards in all of our reporting and coverage. We TheMorningPulse.fyi want to be transparent with our readers about any potential conflicts of interest that may arise in our work. It's possible that some of the investors we feature may have connections to other businesses, including competitors or companies we write about. However, we want to assure our readers that this will not have any impact on the integrity or impartiality of our reporting. We are committed to delivering accurate, unbiased news and information to our audience, and we will continue to uphold our ethics and principles in all of our work. Thank you for your trust and support.