PhonePe CEO Sameer Nigam explains what the newly introduced 0.4% UPI MDR on select merchant transactions of ₹2,000 and above could mean for India's digital payments ecosystem. He says around 96% of Pay-to-Merchant transactions will remain exempt and argues that the revenue could help payment companies cover costs and reinvest in infrastructure, cybersecurity, technology and innovation.
Nigam also discusses merchant adoption, the comparison with credit card MDR, the growth of UPI and the industry's plans to expand digital payments to more users and smaller towns. He explains why he does not ex...
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 of PhonePe, welcomed the government's 0.4% MDR on merchant UPI transactions above ₹2,000, calling it a crucial beginning for the UPI ecosystem. He noted that 96% of transactions remain free, as most are below ₹2,000, and that for six years the industry operated at a loss with zero MDR. Nigam argued that merchants are already accustomed to paying MDR on cards (1.5% to 2.25%), making 0.4% the cheapest globally. He highlighted that revenue will fund investments to grow UPI from 50 crore to 80-90 crore users in seven to eight years and expand internationally. He dismissed concerns about customers declining, stating UPI remains free for them, and drew parallels to Aadhaar's corporate pricing. He emphasized that MDR revenue will support infrastructure, cybersecurity, and merchant digitization.
Key takeaways
0.4% MDR on UPI transactions above ₹2,000 is likely the lowest in the world, with 96% of transactions remaining free.
UPI aims to grow from 50 crore to 80-90 crore users in the next seven to eight years, funded by MDR revenue.
After six years of zero MDR, the industry has been running at a loss; this change will cover costs and enable investment.
The MDR will be shared among five or six ecosystem players, not one party, with the ultimate beneficiary being the customer.
Nigam expects no decline in customer usage, as UPI remains free for consumers.
0:00So, from your perspective, is this the beginning of a sustainable revenue model for the UPI ecosystem?
2:24In such a scenario, how commercially viable will a revenue-sharing model be for payment apps like yours?
3:49Do you think the revenue from MDR will create sufficient incentive to reinvest in payment infrastructure, technology, cybersecurity, and innovation?
5:10And will you now need to focus more on high-value merchant transactions rather than transaction volume, as you mentioned there are 80 crore transactions?
6:19Will it be the card networks or the banks — will they get the benefit?
7:44Will this framework be able to strike a balance between UPI as a free public digital infrastructure and a commercially sustainable payment ecosystem — between these two objectives?
9:11And sir, will there be any difference in the customer base for players like you — will people start using it less, or what?
Sir, the government has imposed a 0.4% MDR on selected merchant UPI transactions of ₹2,000, and has said that about 96% of P2P2M transactions will remain outside this. So, from your perspective, is this the beginning of a sustainable revenue model for the UPI ecosystem?
It is the beginning, and a very important beginning, because as you said, 96% of transactions will remain free, because most transactions in India are of less than ₹2,000. On transactions above ₹2,000, NPCI has given permission for 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 running at a huge loss every year. We were telling the government this every year, and also telling the RBI. So for six years we have been waiting, because before those six years, UPI had an MDR. 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 come. Hopefully, the UPI market will now grow further. With this revenue, we can go and invest so that we can grow UPI further. Right now, about 50 crore citizens use UPI, approximately. We need to take this number up to 80-90 crore people in the next seven to eight years, and for that we need money. If we want to go international, we need money. So this was very, very important to grow the UPI ecosystem. And you also know that in today's times there is cyber fraud, fraud, chargebacks for merchants. The entire burden of that falls on the industry, on fintechs and banks. We were paying all that money out of our own pockets for so many years. That is why almost all the 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 view, today about 60 lakh merchants already pay MDR on RuPay, credit cards, Visa cards, Mastercard, on everything. So many merchants are actually already used to paying MDR. In fact, on credit cards and such, almost 1.5% to 2.25% MDR is charged. This is only 0.4%. So I am hearing a lot of people saying today that people won't pay. That is 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 in the absolute bottom list globally. So the government has kept it very cheap after doing all this. Merchants will pay — why wouldn't they? There are benefits. There is an advantage. The customer doesn't have the problem of exact cash. Everyone comes and pays through the app. They can go cashless. There is data, so merchants, along with their data footprint, can get loans. Many, I mean, many good things happen because of UPI. Payments happen. It's a good thing.
So sir, so far 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?
It absolutely will, sir. In fact, when UPI started 10 years ago, there was an MDR, and the market took off very quickly in the first four years too. Then COVID happened, and during COVID in 2020, the government made MDR zero. That did help — even small businesses came on board with it. But if you look at the volume today, UPI transactions have grown more than 100 times. In a day, there are now roughly 70 to 80 crore transactions — a very large number of transactions. So I feel that now that the industry will get revenue, they will be able to invest. They will be able to go into more and smaller cities. They will be able to digitize more merchants. On the customer side, TSPs are also finally getting money after six years. So all of us will be able to do more marketing and bring in more use cases. All businessmen in the world want the same thing, right — to grow their trade, to grow their business. Payment companies are no different. Money will come, and only then will things grow.
Sir, with this decision, now that MDR is being introduced, will there be any change in your business model? And will you now need to focus more on high-value merchant transactions rather than transaction volume, as you mentioned there are 80 crore transactions?
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Nigam, S. (2026, September 15). UPI MDR Explained: PhonePe CEO Sameer Nigam on What the New Policy Means for Digital Payments [Interview transcript]. NDTV. CEOInterviews.AI. https://ceointerviews.ai/interview/3044219/
MLA
Sameer Nigam. "UPI MDR Explained: PhonePe CEO Sameer Nigam on What the New Policy Means for Digital Payments." NDTV, 15 Sep. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/3044219/.
BibTeX
@misc{nigam2026_3044219,
author = {Sameer Nigam},
title = {UPI MDR Explained: PhonePe CEO Sameer Nigam on What the New Policy Means for Digital Payments},
howpublished = {Interview transcript, NDTV. CEOInterviews.AI},
year = {2026},
month = {sep},
url = {https://ceointerviews.ai/interview/3044219/},
note = {Speaker-attributed transcript with timestamps}
}
