The new Merchant Discount Rate (MDR) structure for Unified Payments Interface (UPI) transactions could significantly change the revenue outlook for payment companies, with Paytm emerging as one of the major potential beneficiaries. Brokerage firms Goldman Sachs and Jefferies have assessed the financial impact of the new framework and highlighted the sizeable opportunity for payment platforms. Their estimates suggest that the introduction of MDR on eligible high-value merchant transactions could create a meaningful revenue pool for the broader UPI ecosystem.
The new framework will apply from October 15, 2026. A 0.4 per cent MDR will apply to eligible person-to-merchant (P2M) UPI transactions above Rs 2,000, subject to exemptions, category-specific rates and caps. Person-to-person transactions will continue to remain free.
Jefferies’ assessment of FY26 data shows that Google Pay accounted for around 35 per cent of UPI transaction value, putting it at the top of the market by value. Paytm had a 6 per cent share, while CRED accounted for 2 per cent. Other payment platforms together made up the remaining 57 per cent.
The picture is somewhat different when transaction volumes are considered. Google Pay accounted for 27 per cent of transactions, followed by Paytm at 6 per cent and Navi at 2 per cent. Other platforms collectively accounted for 66 per cent.
The concentration of UPI payments among a relatively small group of platforms becomes important under the new MDR regime because the financial impact will depend heavily on the value and composition of transactions processed by individual payment companies.
Rs 2,000 Threshold Covers Small Share Of Transactions
The new MDR is not applicable to every UPI payment. Under the framework assessed by Jefferies, the standard 0.4 per cent rate applies to eligible P2M payments above Rs 2,000, while specific categories have different rates or caps.
Small merchants with monthly QR-based UPI payments below Rs 1 lakh are also outside the MDR framework. Essential services such as electricity and telecom have a Rs 5-per-transaction cap, while capital-market transactions attract an MDR of 0.02 per cent, subject to a maximum of Rs 300.
Importantly, the government has said that roughly 96 per cent of P2M transactions will remain unaffected, while all P2P transactions will continue to be free.
Jefferies estimates that transactions above Rs 2,000 account for just 4 per cent of P2M transaction volumes but represent approximately 67 per cent of P2M payment value.
Goldman Sachs Sees Rs 20,600 Crore Revenue Opportunity
Goldman Sachs estimates that nearly 48 per cent of UPI P2M transaction value could qualify for the full 40-basis-point MDR.
Based on its assessment, the potential annual industry revenue pool could be around Rs 20,600 crore. However, a separate press report cited a lower estimate of approximately Rs 16,000 crore.
The actual amount flowing to individual payment companies will depend on the applicable MDR rates, exemptions and the manner in which revenue is distributed across participants in the payment ecosystem.
Paytm Could See Rs 1,400 Crore Earnings Boost
Paytm stands out in the brokerage estimates because of the potential scale of its incremental earnings.
Goldman Sachs estimates that Paytm could see an additional Rs 840 crore to Rs 1,400 crore in FY28 EBITDA as a result of the MDR framework. That would represent roughly 43 per cent to 72 per cent of the brokerage’s existing FY28 EBITDA estimate for the company.
Its bottom-up calculation produces a broadly similar range of Rs 850 crore to Rs 1,410 crore.
Jefferies has also revised its Paytm earnings estimates following the MDR announcement. It estimates that net UPI MDR could contribute around 9 per cent to Paytm’s FY28 revenue and 31 per cent each to EBITDA and profit before tax (PBT), under its assumptions.
The estimates underline why the new framework has drawn investor attention to payment companies. Paytm shares also rose sharply in Wednesday’s trading session following the MDR announcement, with brokerages revisiting their earnings outlook for the company.
Pine Labs Also Stands To Gain
Paytm is not the only payment company expected to benefit. Jefferies estimates that Pine Labs could generate an additional Rs 160 crore in revenue by FY28 from UPI MDR. The brokerage estimates this would be equivalent to around 20 per cent of its projected FY28 EBIT and PBT.
However, both brokerages have flagged uncertainties around the eventual earnings impact. Lower MDR slabs, exemptions and competitive dynamics could determine how much of the headline MDR actually translates into revenue for individual payment companies.
The new framework therefore creates a potential monetisation opportunity for the payments industry, but the ultimate benefit will depend on the mix of eligible transactions and how MDR revenue is distributed across banks, payment applications and other ecosystem participants.