2 hrs ago
Paytm, MobiKwik Rally as UPI Merchant Fees Boost Outlook
Some digital payment companies saw their share prices rise after a new UPI fee was announced.
The fee is called the Merchant Discount Rate, or MDR.
Starting October 15, certain payments to merchants above ₹2,000 will carry a 0.4% charge.
The charge will be limited to ₹300 for very large transactions.
Transfers between friends and family will remain free.
Small vendors and many small payments will also remain exempt.
Payment apps cannot add extra platform fees, and merchants cannot pass the MDR to customers.
Investors expect the new system to make payment companies’ revenues more predictable.
Paytm shares rose 7% to ₹1,856.50, reaching a fresh 52-week high on the BSE.
MobiKwik gained 6% to ₹214, while Pine Labs fell 6% to ₹182.
A 0.4% MDR will apply to person-to-merchant UPI payments above ₹2,000 from October 15.
The MDR will be capped at ₹300 for transactions worth ₹75,000 or more.
Analysts said the fee could improve revenue visibility, with Paytm potentially generating ₹11.2 billion by FY28.
- Who
- Paytm, MobiKwik, Pine Labs, the National Payments Corporation of India, and digital payments analysts.
- What
- A new MDR on some UPI merchant payments prompted buying in Paytm and MobiKwik shares, while Pine Labs declined.
- Where
- The share-price movements occurred on the BSE, and the rules apply to UPI transactions in India.
- When
- The announcement was made Tuesday; shares moved Wednesday, and the MDR starts October 15.
- Why
- Analysts expect the MDR to create a more predictable revenue model and increase the digital payments sector’s revenue potential.
Revenue and Industry Outlook
Consumer and Small-Merchant Protection
Effect of MDR
Revenue and Industry Outlook
Analysts said the fee creates a more predictable revenue framework and could expand digital payment companies’ revenue potential.
Consumer and Small-Merchant Protection
The rules keep everyday person-to-person payments and many small-merchant transactions free, limiting the reach of the new charge.
Who pays
Revenue and Industry Outlook
The MDR applies to qualifying merchant payments above ₹2,000, providing a new fee pool for payment companies.
Consumer and Small-Merchant Protection
App providers cannot add platform fees, banks cannot allow merchants to pass MDR costs to customers, and one-fifth of the fee pool will support small-merchant UPI expansion.
Key facts
- New MDR rate
- 0.4% on person-to-merchant UPI payments above ₹2,000
- Effective date
- October 15
- Maximum charge
- ₹300 for transactions of ₹75,000 or more
- Exempt transactions
- Person-to-person transfers and payments to small vendors under the P2PM category
- Small-merchant protection
- Merchants earning up to ₹1 lakh a month through UPI QR codes remain fully exempt
- Transaction coverage
- The government says 96% of merchant transactions will remain shielded from the new charge
- Projected Paytm revenue
- ₹11.2 billion in UPI MDR revenue by FY28, according to reports
- Projected Pine Labs revenue
- ₹1.55 billion under conservative assumptions, according to reports
Sources
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