PhonePe CEO Sameer Nigam discusses the future of UPI and the debate around MDR (Merchant Discount Rate) on digital transactions. He explains why transaction charges could be important for the long-term revenue sustainability of payment apps, while highlighting the need to reinvest in infrastructure, technology and cybersecurity. The discussion also covers the potential impact of MDR on merchants, banks, card networks and other UPI ecosystem participants, as well as how payment companies may need to evolve their business models. Watch the full conversation for insights into the balance between...
What Sameer Nigam said
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Sameer Nigam, CEO of PhonePe, discussed the reintroduction of a 0.4% MDR on UPI merchant transactions above ₹2000, calling it a crucial first step toward sustainability after six years of zero MDR, during which the industry incurred losses. He noted that 96% of transactions remain free, and the charge, which he considers among the cheapest globally, will cover industry costs. Nigam emphasized that this revenue will enable investment in expanding UPI from 500 million to 800-900 million users over the next seven to eight years, support international growth, and fund cybersecurity efforts. He dismissed concerns that customers will stop using UPI, stating that customers are not charged, and merchants are already accustomed to paying MDR on cards. He also rejected the notion that the industry will shift focus to high-value transactions, affirming equal treatment for all transactions. He concluded that UPI will remain free for citizens, balancing public good with commercial viability.
Key takeaways
The 0.4% MDR will cover industry costs and is a 'very important beginning' for a sustainable UPI ecosystem after six years of losses.
UPI is used by about 500 million citizens; the goal is to grow to 800-900 million users in the next seven to eight years.
MDR is the cheapest in the world at 0.4%, far below credit card MDR of 1.5% to 2.25%.
Customers will not be charged or stop using UPI; the charge is on merchants, and UPI remains free for citizens.
0:00So from your perspective, will this be the beginning of a sustainable revenue model for the UPI ecosystem?
2:45In such a case, how commercially viable will the revenue-sharing model be for payment apps like yours?
4:10Do you think the revenue from MDR will create enough incentive to reinvest in payment infrastructure, technology, cybersecurity, and innovation?
5:31And will there be a need to focus more on high-value merchant transactions instead of transaction volume, as you mentioned there are 800 million transactions?
6:40Will the card networks or banks benefit from this?
8:04Will this framework be able to balance the two objectives of keeping UPI as a free public digital infrastructure and a commercially sustainable payment ecosystem?
For the past six years, when this MDR was free, the entire payment industry was going into significant losses every year. There are digital payments in more than 200 countries in the world. India was the only country where there was no MDR on UPI. So now it has come. So hopefully, the UPI market will also grow here. Sir, the government has applied a 0.4% MDR on selected merchant UPI transactions of ₹2000 and has said that about 96% of peer-to-peer transactions will be exempt from this. So from your perspective, will this be the beginning of a sustainable revenue model for the UPI ecosystem?
It will be the beginning, and a very important beginning, because as you said, 96% of transactions will remain free because most transactions in India are below ₹2000. For transactions above ₹2000, NPCI has permitted a 0.4% UPI MDR. So this charge will apply to large transactions, and the revenue the industry gets from this will at least cover our costs. For the past six years, when this MDR was free, the entire payment industry was going into significant losses every year. We were telling the government this every year. We were also telling the RBI. So we have been waiting for six years because six years ago, there was MDR on UPI. There are digital payments in more than 200 countries in the world. India was the only country where there was no MDR on UPI. So now it has come. So hopefully, the UPI market will also grow here.
With this revenue, we will be able to invest and grow UPI further. Currently, about 500 million citizens use UPI. We need to take this number to 800-900 million people in the next seven to eight years, and that requires money. If we want to go international, that also requires money. So this was very, very important for growing the UPI ecosystem. And as you know, in today's world, there is cyber fraud, fraud, and chargebacks for merchants. The entire burden of that falls on the industry, on fintechs and banks. We have been paying all those costs from our own pockets for so many years. That's why almost all players in the industry were in losses. So this is very welcome.
Sir, the MDR will not be charged to the customer, and merchants will also not be allowed to pass it on to the customers. In such a case, how commercially viable will the revenue-sharing model be for payment apps like yours?
In my opinion, as of today, about 6 million merchants already pay MDR on RuPay, credit cards, Visa cards, Mastercard, etc. So many merchants are actually already used to paying MDR. In fact, on credit cards, etc., the MDR goes up to almost 1.5% to 2.25%. This is only 0.4%. So I am hearing many people saying today that people won't pay. That's not the case. In fact, this is probably the cheapest MDR in the world. I checked and haven't found it in any other market yet. 0.4% is either the lowest in the world or at least at the very bottom. So the government has kept it very cheap after doing everything. So why won't they pay? There are benefits. Customers don't have the problem of exact cash. Everyone comes and pays via the app. They can go cashless. There is data, so merchants can get loans with their data footprint. Many, I mean, many good things happen because of UPI. Payments are made. It's a good thing.
So sir, until now, the growth of UPI has largely happened on a zero-MDR model. Do you think the revenue from MDR will create enough incentive to reinvest in payment infrastructure, technology, cybersecurity, and innovation?
It will absolutely do that, sir. In fact, UPI had MDR when it started 10 years ago, and the market grew very quickly in the first four years too. Then COVID happened, and during COVID in 2020, the government made MDR zero. That helped small businesses come on board too. But if you look at the volume today, UPI transactions have increased 100 times. There are about 700 to 800 million transactions a day, a very large number. So I feel that now the industry will get revenue. They will be able to invest. They will be able to go to smaller cities. They will be able to digitize more merchants. On the customer side, the apps are finally getting money after six years. So we will all be able to do more marketing and bring more use cases. All businessmen in the world want to grow their trade, grow their business. So payment companies will be different. They will grow only when the money comes.
Sir, with this decision, now that this MDR is being introduced, will we see any change in your business model? And will there be a need to focus more on high-value merchant transactions instead of transaction volume, as you mentioned there are 800 million transactions?
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Nigam, S. (2026, September 16). PhonePe CEO Sameer Nigam On UPI MDR: Why Payment Apps Need Transaction Charges To Survive | Watch [Interview transcript]. Mint. CEOInterviews.AI. https://ceointerviews.ai/interview/1352433/
MLA
Sameer Nigam. "PhonePe CEO Sameer Nigam On UPI MDR: Why Payment Apps Need Transaction Charges To Survive | Watch." Mint, 16 Sep. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/1352433/.
BibTeX
@misc{nigam2026_1352433,
author = {Sameer Nigam},
title = {PhonePe CEO Sameer Nigam On UPI MDR: Why Payment Apps Need Transaction Charges To Survive | Watch},
howpublished = {Interview transcript, Mint. CEOInterviews.AI},
year = {2026},
month = {sep},
url = {https://ceointerviews.ai/interview/1352433/},
note = {Speaker-attributed transcript with timestamps}
}
