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India to introduce UPI merchant fees, potentially boosting PhonePe and Google Pay revenue
India is transitioning its Unified Payments Interface (UPI) from a largely free network to one that includes merchant fees. Starting October 15, 2026, a Merchant Discount Rate (MDR) of 0.4% will be applied to transactions exceeding 2,000 rupees. This policy shift is intended to generate revenue to cover the operational costs of the expanding digital network.
Industry analysts at Bernstein estimate the change could generate up to $1.1 billion in annual revenue for payment applications by March 2028. Dominant players PhonePe and Google Pay, which currently control approximately 80% of UPI payment values, are projected to capture about $900 million of that revenue. This could further entrench their market position and provide capital for expansion into rural areas.
While the fees apply to merchants, the Indian government has stated that the burden should not fall on consumers, and person-to-person transfers will remain free. The shift has raised concerns regarding market concentration and whether merchants might indirectly pass costs to customers.
In parallel, infrastructure providers like Montran India are expanding UPI capabilities, introducing features such as MyUPI, Tap & Pay via NFC, and Contextual EMI to support the scaling ecosystem.
Entities
Google Pay · Google Play Store · India · Montran India · National Payments Corporation of India · PhonePe · Unified Payments Interface
Claims
What the coverage asserts, and how many sources carry each claim.
- [● 3 SOURCES] A 0.4% merchant fee will apply to UPI transactions exceeding 2,000 rupees. millattimes.com · uniquetimes.org · arynews.tv
- [● 3 SOURCES] PhonePe and Google Pay could receive approximately $900 million of the projected annual revenue. millattimes.com · uniquetimes.org · arynews.tv
- [● 2 SOURCES] Montran India has enabled new UPI capabilities including MyUPI, UPI Tap & Pay, and Contextual EMI. startupsuccessstories.in · smestreet.in
- [○ 1 SOURCE] The MDR is a charge between service providers and is not intended to be passed on to consumers. gulfnews.com
- [○ 1 SOURCE] Person-to-person UPI transfers will remain free of charge. gulfnews.com
- [● 3 SOURCES] The Indian government will introduce a Merchant Discount Rate (MDR) on certain UPI transactions. millattimes.com · uniquetimes.org · arynews.tv
- [● 3 SOURCES] PhonePe and Google Pay accounted for roughly 80% of UPI payment values in the previous month. millattimes.com · uniquetimes.org · arynews.tv
- [● 3 SOURCES] The new fee structure could generate up to $1.1 billion in annual revenue for payment apps by March 2028. millattimes.com · uniquetimes.org · arynews.tv