India's decision to allow a 0.4% merchant discount rate on UPI transactions above 2,000 rupees from October 15 could generate a substantial new revenue pool for payment apps, Reuters reported on September 22.
PhonePe and Google Pay together handled about 80% of UPI payment value last month. Brokerage Bernstein estimates that the new merchant-fee regime could generate up to $1.1 billion a year for payment apps by March 2028. Based on their current market share, PhonePe and Google Pay could account for roughly $900 million of that amount.
The fee applies to merchant transactions above 2,000 rupees. It does not apply to person-to-person transfers, and exemptions or lower charges apply in some categories.
Industry executives and investors told Reuters the new revenue could make rural expansion more commercially attractive for the largest apps, while smaller rivals may focus more on higher-value payments, bill payments and credit-related services.
The change could also renew scrutiny of market concentration. The National Payments Corporation of India has twice delayed implementation of a 30% market-share cap for individual UPI apps.
The fee has drawn political criticism and concerns that merchants could indirectly pass costs to consumers, although regulations prohibit explicit pass-through and several merchants Reuters interviewed said they expected to absorb the charge.
The policy is scheduled to take effect on October 15, so revenue estimates remain forecasts rather than realised earnings.