40-Basis-Point UPI Fee Prospect Lifts Indian Fintech Stocks
Indian fintech stocks rallied after reports that UPI merchant payments may get a 40-basis-point MDR, potentially reopening fee revenue for payment platforms.
A proposed 40-basis-point merchant discount rate on India’s UPI payments sent listed fintech stocks sharply higher on Friday, Inc42 reported, as investors priced in a possible return of fee revenue for payment companies.
The move was visible first in the market reaction.
Pine Labs rose 16.9% to close at ₹202.35 on the BSE, Mobikwik gained just over 8% to ₹209.80, and AvenuesAI advanced 6.1% to ₹16.31.
Paytm ended 3.9% higher at ₹1,806.25 after touching a fresh intraday all-time high of ₹1,829.50, a 5.2% rise during the session.
The rally followed reports that MDR on UPI payments could soon be notified at about 40 bps, or 0.4% of transaction value.
The policy change would matter because UPI has operated for years under a zero-MDR model that limited direct transaction-fee revenue for apps and payment infrastructure companies.
A legal opening arrived about a month earlier, when the Centre amended the Payment and Settlement Systems Act, 2007, to remove the blanket prohibition on banks and system providers charging fees on UPI payments.
That amendment did not itself set a fee, but it changed the policy base for a possible charging framework.
The proposed charge is expected to apply only to person-to-merchant UPI transactions, not person-to-person transfers.
It is also expected to include a turnover threshold, limiting the charge to merchants with annual turnover of roughly ₹1 crore to ₹1.5 crore or more.
Earlier coverage also pointed to possible sector-based differences in fees.
The economics would not flow evenly through the payments chain.
Third-party application providers, the UPI apps that face customers, would receive roughly 30% of the MDR, equivalent to about 12 bps of transaction value, while the rest would be shared elsewhere in the acceptance and banking system.
That split is why the share moves reached beyond Paytm.
A previous Jefferies research note estimated that MDR on UPI could open a revenue pool of about ₹5,000 crore to ₹10,000 crore for payment platforms including Paytm, Pine Labs, Mobikwik and AvenuesAI.
For listed fintechs, the market read the proposal as a possible shift from scale without fees toward scale with a defined monetisation channel.
The notification remains the operating condition.
Until the government sets the final MDR level, merchant threshold and distribution rules, Friday’s rally reflects expectations around a possible framework rather than an implemented fee on UPI transactions.
