Revenue Pool Expands
A modest merchant discount rate on Unified Payments Interface transactions could unlock a substantial new revenue stream for India's digital payments industry, with Bernstein estimating a potential pool of Rs 27,000 crore by FY28. The brokerage's assessment points to the sheer scale of UPI adoption and the possibility that even a low fee, if applied selectively, could translate into meaningful monetisation across the payments stack.
The estimate is built around a 40-basis-point MDR, or merchant discount rate, on UPI payments. In practical terms, that means a small charge on merchant transactions rather than on consumer transfers, preserving the low-cost appeal that has made UPI the backbone of India's retail digital payments system. Bernstein's view suggests that the economics of UPI may be entering a new phase, one in which the infrastructure supporting instant payments begins to generate more visible commercial returns.
Who Captures The Fees
According to the brokerage, the revenue pool would not accrue to a single participant. Issuing banks and UPI apps are expected to receive substantial portions of the proceeds, reflecting their role in enabling transactions and maintaining customer interfaces. Merchant-side payment apps and acquiring banks would also capture significant shares, creating a broader distribution of income across the ecosystem.
That split matters because UPI has long been treated as a public digital utility, with most consumer transactions remaining free at the point of use. Any move toward MDR-based monetisation would therefore need to balance the interests of banks, payment apps, merchants and policymakers. Bernstein's estimate indicates that the industry could support a fee structure without undermining the system's core value proposition, provided the charges remain limited and targeted.
The brokerage also noted that the proposed levy would stay well below card-based payment fees. That comparison is important for merchants, many of whom already absorb higher costs on card transactions. A lower MDR on UPI could make the system more commercially sustainable while still preserving its price advantage over legacy payment rails.
Policy And Scale
The broader policy question is whether UPI can continue expanding at its current pace without a clearer revenue model for the institutions that operate and maintain it. India's instant payments architecture has grown rapidly because it combines convenience, speed and near-zero cost for users. But as transaction volumes rise, the cost of infrastructure, fraud prevention, compliance and network maintenance also increases.
Bernstein's estimate implies that a carefully designed MDR could help fund that expansion. By creating a revenue pool tied to usage, the system could support issuing banks, payment apps and acquiring institutions that bear operating costs. The brokerage's framing suggests that the levy is less about extracting rent from consumers and more about sustaining the ecosystem that underpins mass digital adoption.
The exemption of many smaller transactions is equally significant. It indicates that any policy shift would likely preserve the low-cost nature of everyday micro-payments, which are central to UPI's popularity among consumers and small merchants. That design would help limit backlash while allowing larger merchant transactions to contribute to the system's economics.
For the automotive, EV and mobility sector, the implications are indirect but relevant. Vehicle purchases, charging infrastructure, fleet services and mobility subscriptions increasingly rely on digital payments, and a more durable UPI monetisation framework could shape how merchants and payment intermediaries price and process those transactions. If implemented, the fee structure could influence settlement economics across a wide range of consumer-facing industries.
For now, Bernstein's estimate is best read as a marker of what UPI's scale could support rather than a policy announcement. Still, the size of the projected pool underscores a central reality: India's digital payments network has matured to the point where even a small levy can generate large sums, forcing a fresh debate over who pays, who benefits and how the system is financed over the long term.