UPI MDR could make digital payments sustainable, say fintech leaders
Synopsis
India's biggest real-time payments network has a financial problem: UPI generates almost no direct revenue while costing banks and fintechs billions to run. Now, MobiKwik's top executives are publicly calling for an MDR on UPI — a politically charged ask that could reshape how India funds its digital payments ambition to reach one billion users.
Key Takeaways
Fintech leaders called for a Merchant Discount Rate (MDR) on UPI transactions to build a sustainable revenue model for India's digital payments ecosystem.
Server cost per UPI transaction is currently 17–20 paise , with additional costs in engineering, risk management, and cybersecurity.
Government incentives cover only around 10 per cent of the overall operational cost incurred by UPI operators.
Approximately 500–600 million people currently use UPI; leaders say reaching one billion users in 10 years requires a stable revenue source.
MobiKwik CFO Upasana Taku and CEO Bipin Preet Singh both publicly endorsed the MDR proposal on 16 September 2026 .
UPI transactions were made MDR-free from January 2020 by government directive, removing a key revenue stream for payment providers.
The introduction of a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions could deliver a sustainable revenue model for India's digital payments ecosystem and help scale the platform to one billion users over the next 10 years, fintech industry leaders said on Wednesday, 16 September 2026. The call from industry comes amid mounting concerns that UPI's explosive growth has outpaced the financial foundations needed to support it.
The Cost Burden Behind UPI's Growth
MobiKwik Co-founder, Executive Director and CFO Upasana Taku said UPI has fundamentally transformed India's payments landscape over the past decade, significantly expanding access to financial products and services. However, she warned that this rapid growth has simultaneously created a significant cost burden for banks and financial institutions.
According to Taku, UPI transactions currently generate little or no direct revenue for operators, even as they account for a substantial share of payment portfolios. She noted that the server cost alone for a single UPI transaction stands at approximately 17–20 paise. On top of that, banks and fintech companies must invest heavily in engineering infrastructure, risk management, and cybersecurity.
'UPI has already transformed the Indian economy, but the ecosystem also needs a sustainable economic model to support its next phase of growth,' Taku said.
Government Incentives Cover Only 10% of Costs
Taku pointed out that government incentives provided to support UPI operations have historically covered only around 10 per cent of the overall cost incurred by operators. With roughly 500–600 million people currently using UPI, she argued that expanding the platform's reach to one billion users within a decade would require a stable, self-sustaining revenue source — something that MDR could provide.
This comes amid a broader global rethink of how real-time payment infrastructure is financed. Several countries with mature digital payment ecosystems rely on merchant-side charges to fund underlying infrastructure, a model that Indian fintech leaders are now openly endorsing.
MobiKwik CEO Backs the MDR Push
MobiKwik Co-founder, Managing Director and CEO Bipin Preet Singh also backed the proposal, noting that India has built the world's largest real-time payments ecosystem over the past decade. He emphasised that the infrastructure underpinning this achievement is largely supported by banks and financial institutions that continue to absorb significant operational and technology costs.
'Introducing UPI MDR can strengthen the long-term sustainability of the ecosystem,' Singh said.
What MDR on UPI Would Mean for the Ecosystem
A Merchant Discount Rate is a small fee charged to merchants for processing digital transactions. UPI transactions were made MDR-free from January 2020 onwards, following a government directive, which effectively removed a key revenue stream for payment service providers. Reinstating even a nominal MDR — industry advocates are careful not to specify a rate — could, according to these executives, unlock investment capacity for technology upgrades, fraud prevention, and rural expansion.
The fintech executives stressed that a sustainable revenue framework would be critical to maintaining long-term investments in technology, cybersecurity, and risk management as UPI usage continues to scale across the country. How the government and the Reserve Bank of India (RBI) respond to the industry's call remains to be seen, and any policy shift on UPI MDR is expected to be politically sensitive given UPI's positioning as a citizen-first, zero-cost payment tool.
Point of View
Popular win that no ministry wants to unwind. But the fintech industry's growing willingness to make this case publicly signals that the cost pressure is becoming genuinely unsustainable, not just a negotiating tactic. The 10-per-cent coverage figure, if accurate, should concern policymakers: infrastructure funded almost entirely by private balance sheets is infrastructure that can be quietly starved of investment. The real question is not whether MDR returns, but whether the government can design a version — exempting small merchants and low-value transactions — that preserves UPI's inclusive brand while giving operators a viable economics.
NationPress
16 Sept 2026
Frequently Asked Questions
What is UPI MDR and why are fintech leaders calling for it?
A Merchant Discount Rate (MDR) is a small fee charged to merchants for processing digital transactions. Fintech leaders are calling for its reintroduction on UPI because government incentives currently cover only about 10 per cent of operational costs, making the ecosystem financially unsustainable as it scales toward one billion users.
When was MDR removed from UPI transactions?
The government directed that UPI transactions be made MDR-free from January 2020, effectively removing a direct revenue stream for banks and payment service providers. The move boosted UPI adoption but left operators absorbing the full infrastructure cost.
How much does a single UPI transaction cost to process?
According to MobiKwik CFO Upasana Taku, the server cost alone for a single UPI transaction is approximately 17–20 paise. Banks and fintechs also bear additional costs in engineering infrastructure, risk management, and cybersecurity on top of that.
Who would be affected if UPI MDR is introduced?
Merchants would primarily bear the MDR charge, as is standard with payment processing fees. Consumers are unlikely to be directly charged, but the design of any MDR framework — particularly exemptions for small merchants and micro-transactions — will determine the impact on UPI's broad user base.
How many people currently use UPI and what is the target?
Approximately 500–600 million people currently use UPI, according to MobiKwik's leadership. The industry's stated target is to expand that to one billion users over the next 10 years, a goal that fintech leaders say requires a stable, self-sustaining revenue model.
