UPI MDR can help make digital payments ecosystem sustainable: Fintech leaders
The introduction of a Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions could provide a sustainable revenue model for the digital payments ecosystem and support its expansion to one billion users over the next decade, fintech industry leaders said on Wednesday.
MobiKwik Co-founder, Executive Director and CFO Upasana Taku said UPI has transformed India's payments landscape over the past decade and played a significant role in expanding access to financial products and services.
However, the rapid growth of UPI has also created a significant cost burden for banks and financial institutions, she said, as transactions currently generate little or no direct revenue despite accounting for a substantial share of their payment portfolios.
"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 in an interaction with IANS.
She noted that around 500-600 million people currently use UPI and that expanding the platform's reach to one billion users over the next 10 years would require a stable source of revenue.
According to Taku, the server cost associated with a single UPI transaction is currently around 17-20 paise. In addition to these direct costs, banks and fintech companies have to invest heavily in engineering infrastructure, risk management and cybersecurity to operate and secure the payment ecosystem.
She said government incentives provided to support UPI operations have covered only around 10 per cent of the overall cost, making the introduction of MDR an important step towards improving the financial sustainability of the system.
MobiKwik Co-founder, Managing Director and CEO Bipin Preet Singh also backed the move, saying UPI has helped India build the world's largest real-time payments ecosystem over the past decade.
He pointed out that the infrastructure is largely supported by banks and financial institutions, which incur significant operational and technology costs.
"Introducing UPI MDR can strengthen the long-term sustainability of the ecosystem," Singh said.
The fintech executives said a sustainable revenue framework would be important for maintaining investments in technology, cybersecurity and risk management as UPI usage continues to expand across the country.
