Bernstein has estimated that a 40-basis-point merchant discount rate, or MDR, on Unified Payments Interface transactions could create a revenue pool of roughly Rs 27,000 crore by FY28, a development that would mark one of the most consequential shifts yet in India's digital payments economics.
The projection matters because UPI has become the backbone of retail payments in India, processing billions of low-value transactions each month and anchoring the country's push toward a cash-light economy. For years, the system has operated with little or no direct merchant charge on most transactions, a policy choice that helped accelerate adoption among consumers and small businesses. Bernstein's estimate suggests that even a modest levy could unlock a large and durable monetisation opportunity across the payments chain.
Revenue Pool Expands
Bernstein said the proposed 40-basis-point MDR would not be a blanket charge on every UPI payment. Instead, the structure is expected to exempt many smaller transactions, limiting the burden on low-ticket merchants and preserving the affordability that has driven UPI's rapid scale-up. The brokerage argued that the charge would still remain materially below the cost structure typically associated with card payments, making it a comparatively light fee in the broader digital payments market.
The key implication is that UPI's next phase may be less about pure transaction growth and more about the distribution of value within the ecosystem. As volumes continue to rise, even a small fee on a subset of payments could generate substantial annual revenue by FY28. Bernstein's estimate underscores how the economics of India's payments infrastructure could evolve as the system matures from a public utility-like platform into a more commercially layered network.
Who Gains Most
According to Bernstein's framework, issuing banks and UPI apps would receive substantial portions of the estimated revenue pool. Merchant-side payment apps and acquiring banks would also capture meaningful shares, reflecting the multi-party nature of UPI transaction processing. That distribution is important because it suggests the levy would not simply enrich one segment of the ecosystem, but instead create a broader incentive structure for banks, app operators and payment intermediaries.
For issuing banks, the revenue opportunity could help offset the costs of maintaining payment rails and customer interfaces. For UPI apps, a fee-linked model could improve monetisation prospects in a market where consumer adoption has historically outpaced direct revenue generation. Merchant-side apps and acquiring banks, meanwhile, would gain a clearer commercial rationale for investing in acceptance infrastructure, merchant onboarding and transaction support.
The proposal also speaks to a longstanding policy tension in India's digital payments story: how to sustain a high-volume, low-cost public payments network without undermining the economics of the institutions that operate it. UPI has been widely celebrated for scale and convenience, but the absence of meaningful merchant charges has left the ecosystem dependent on policy support and indirect monetisation. Bernstein's estimate suggests that a carefully calibrated MDR could provide a more sustainable funding base.
Policy Trade-Offs Ahead
Any move toward MDR on UPI would likely invite scrutiny from merchants, consumer advocates and policymakers, particularly if the charge were applied too broadly or too quickly. Small businesses have benefited from the low-cost nature of UPI, and any increase in acceptance costs could face resistance. At the same time, the brokerage's analysis implies that a limited, lower-ticket-exempt structure could preserve the core advantages of the platform while allowing the ecosystem to capture value from larger transactions.
The broader significance extends beyond payments alone. UPI is deeply embedded in India's retail commerce, mobility payments and everyday consumer spending, including sectors such as automotive and EV charging where digital acceptance is increasingly important. A sustainable monetisation model could support continued expansion into these use cases by funding infrastructure, reliability and merchant integration.
For now, Bernstein's estimate is best read as a marker of what UPI's scale could mean if the policy environment shifts toward partial monetisation. The figure of Rs 27,000 crore by FY28 highlights the size of the opportunity, but also the sensitivity of any move that would alter one of India's most successful digital public infrastructure platforms.