Will the MDR tide lift all UPI apps? That’s the big question as we enter the critical phase of discussions and consultations around monetisation of UPI payments in India.

The absence of the merchant discount rate or MDR on UPI transactions has long been a pain point for startups. India’s fintech sector has invested billions in creating the infrastructure needed for UPI payments penetration but has not seen much in the way of revenue upside.

The industry has argued that the inability to monetise UPI offerings has resulted in loss-making apps which are struggling to keep up with the maintenance and expansion costs associated with being a high-volume payments app. However, there are signs that the end of the free UPI era is near.

In March, the Payments Council of India (PCI) wrote to Prime Minister Narendra Modi, asking to allow charging MDR on large merchants for transactions above INR 2,000. The demand was also supported by tech policy lobbying body Startup Policy Forum (SPF) as well as a host of fintech startups.

Some — such as MobiKwik and Paytm — have staked their future growth on the basis of MDR coming into the picture. But early discussions around this monetisation indicates that any MDR introduced would only be for UPI transactions above INR 2,000 processed by ‘large merchants’.

As per the RBI, a large merchant is defined as a business with an annual turnover greater than INR 20 Lakh in the previous fiscal year. Such merchants can earn up to 0.3% on each eligible transaction, as per the speculation around MDR rules currently.

It must be noted that MDR is not yet officially applicable, but as we have reported earlier, the industry is hopeful of positive news on this front.

MobiKwik CEO Bipin Preet Singh said recently that MDR talks are already in motion from the RBI “From our perspective, this will definitely introduce a new revenue stream that we are currently not receiving, making it essentially 100% profit for us from any Pocket UPI transactions.”

Such statements of optimism have come from others too, but the fact is that outside of the top three UPI apps, India currently has a long tail of UPI apps that don’t necessarily process such a high volume of transactions and where the average transaction size would not bring in much MDR upside.

Who among the UPI underdogs like CRED, Amazon Pay, Groww, MobiKwik, FamApp, Navi, Super.Money and others will be able to make the most of MDR? Or will this primarily boost the frontrunners?

What NPCI’s........

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