Karnataka: PhonePe Founder & CEO Sameer Nigam explains the new UPI Merchant Discount Rate (MDR) policy, saying the 0.4% MDR on large-value merchant transactions will help make the digital payments ecosystem more sustainable. He says around 96% of UPI transactions will remain free, while the additional revenue can support innovation, merchant digitization and expansion into smaller towns and cities.
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What Sameer Nigam said
Written from the verified transcript and checked against it. Every figure links to the moment it was said.
Sameer Nigam, CEO and co-founder of PhonePe, discussed the government's new 0.4% Merchant Discount Rate (MDR) on select merchant UPI transactions above ₹2,000, which took effect after six years of zero MDR due to the COVID-19 pandemic. He said the industry had been in significant losses each year during that period, despite annual appeals to the government and RBI. Nigam argued the MDR is essential for sustainability and growth, aiming to expand UPI users from 500 million to 800-900 million over the next seven to eight years. He defended the rate as one of the lowest globally and noted that roughly 6 million merchants already pay far higher MDR on credit cards and other instruments. He dismissed concerns about customer backlash, stating users won't stop using UPI since they aren't charged, and drew parallels to Aadhaar's fee model.
Key takeaways
The new 0.4% MDR applies only to merchant UPI transactions above ₹2,000, leaving 96% of transactions free.
UPI has approximately 500 million users, which Nigam wants to grow to 800-900 million in the next seven to eight years.
Before this, India was the only country among over 200 with digital payments that had no MDR on UPI.
Nigam expects the revenue from MDR to enable investment in infrastructure, cybersecurity, and expansion into smaller towns.
Nigam believes customers will not stop using UPI because they are not charged the MDR fee.
Numbers and commitments
Figure
What it refers to
Type
At
0.4%
New MDR on select merchant UPI transactions above ₹2,000
0:49So, from your perspective, will this be the beginning of a sustainable revenue model for the UPI ecosystem?
3:13In such a scenario, how commercially viable will a revenue-sharing model be for payment apps like yours?
4:38Do you think the revenue from MDR will create sufficient incentive to reinvest in payment infrastructure, technology, cybersecurity, and innovation?
6:00Will this framework be able to balance the two objectives of keeping UPI as a free public digital infrastructure and a commercially sustainable payment ecosystem?
7:26And sir, will there be any difference in the customer base, like for players like you, will people start using it less or what?
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. In the world, there are more than 200 countries with digital payments. India was the only country where there was no MDR on UPI. So now it has been introduced. There are approximately 500 million citizens who use UPI. We need to take this number forward to 800-900 million people. As of today, about 6 million merchants already pay MDR on RuPay, credit cards, Visa cards, Mastercard, everything. 0.4% is not just the lowest in the world, it will be at the very bottom of the list globally. Yet, the government has kept it very cheap after all the deliberations.
Sir, the government has applied a 0.4% MDR on selected merchant UPI transactions above ₹2,000 and has said that about 96% of peer-to-peer transactions will remain outside 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 ₹2,000. For transactions above ₹2,000, NPCI has permitted a 0.4% UPI MDR. This charge will apply to larger transactions, and the revenue 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. In the world, there are more than 200 countries with digital payments. India was the only country where there was no MDR on UPI. So now it has been introduced. Hopefully, the UPI market will also grow from here. With this revenue, we will be able to invest further to grow UPI. Currently, there are about 500 million citizens who use UPI. We need to take this number forward to 800-900 million people in the next seven to eight years, and that requires money. If we want to go international, that requires money. So this was very, very important for growing the UPI ecosystem. And you probably know that in today's world, there is cyber fraud, fraud, chargebacks for merchants. The entire burden of that falls on the industry, on fintechs and banks. We have been paying all that money from our 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 customer. In such a scenario, how commercially viable will a revenue-sharing model be for payment apps like yours?
Sir, in my opinion, as of today, about 6 million merchants already pay MDR on RuPay, credit cards, Visa cards, Mastercard, everything. So many merchants are actually already accustomed to paying MDR. In fact, on credit cards etc., the MDR goes up to almost 1.5% to 2.25%. This is just 0.4%. So I am hearing many people today saying that people won't pay. That's not the case. This is perhaps the cheapest MDR in the world. I've checked, and I haven't found it in any other market yet. 0.4% is not just the lowest in the world, it will be at the very bottom of the list globally. Yet, the government has kept it very cheap after all the deliberations. So why wouldn't merchants pay? There are benefits. Customers don't have the problem of exact cash. Everyone comes and pays via the app. They can go cashless. They have data, so merchants can get loans with their data footprint. Many, many good things happen because of UPI. Payments are made easily. 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 sufficient incentive to reinvest in payment infrastructure, technology, cybersecurity, and innovation?
6 more exchanges in this transcript
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Nigam, S. (2026, September 15). Govt move on MDR important for long-term growth, sustainability of UPI: PhonePe Founder Sameer Nigam [Interview transcript]. ET Digital. CEOInterviews.AI. https://ceointerviews.ai/interview/2939830/
MLA
Sameer Nigam. "Govt move on MDR important for long-term growth, sustainability of UPI: PhonePe Founder Sameer Nigam." ET Digital, 15 Sep. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/2939830/.
BibTeX
@misc{nigam2026_2939830,
author = {Sameer Nigam},
title = {Govt move on MDR important for long-term growth, sustainability of UPI: PhonePe Founder Sameer Nigam},
howpublished = {Interview transcript, ET Digital. CEOInterviews.AI},
year = {2026},
month = {sep},
url = {https://ceointerviews.ai/interview/2939830/},
note = {Speaker-attributed transcript with timestamps}
}
