Paytm, MobiKwik Shares Rise Nearly 5% After New UPI MDR Framework

Shares of Paytm and One MobiKwik Systems moved higher in early trade on Wednesday, September 16, after a new merchant discount rate framework was announced for certain UPI payments. 

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One 97 Communications, Paytm’s parent company, gained 4.62% to ₹1,810, while One MobiKwik Systems rose 4.71% to ₹210.32 as of 9:16 am. 

The market reaction followed the announcement of a revised MDR structure for person-to-merchant UPI transactions. From October 15, payments above ₹2,000 can attract an MDR of up to 0.4%, subject to concessions for specified categories and exemptions for small merchants. 

For customers, however, UPI payments will continue to remain free. 

Most merchant transactions remain outside MDR 

The change is aimed specifically at larger merchant payments rather than the bulk of everyday UPI transactions. 

Payments of up to ₹2,000 will continue under the zero-MDR structure. These transactions make up more than 95% of person-to-merchant UPI volumes. Person-to-person transfers will also remain free. 

For transactions covered by the new framework, the MDR is capped at ₹300. Small merchants receiving up to ₹1 lakh a month through UPI QR codes are exempt from the charge. 

The structure therefore introduces transaction-linked revenue into a portion of the UPI merchant ecosystem without extending the charge to customers making payments. 

Paytm expects additional merchant revenue 

Paytm has indicated that the revised framework will bring additional revenue from its merchant business, as some payment transactions that previously carried no MDR will now fall under the new structure. 

How much of that revenue eventually reaches individual payment companies will depend on the distribution of MDR across different participants in the payment chain. 

The Moneycontrol report cited brokerage estimates suggesting that Paytm could see incremental revenue of ₹2.1 billion in FY27 and ₹4.7 billion in FY28. Incremental adjusted EBITDA was estimated at ₹1.4 billion for FY27 and ₹4.4 billion for FY28. 

Those estimates are based on assumptions about Paytm’s share of eligible transactions and the eventual allocation of MDR across the ecosystem. The final distribution of the MDR pool among participants has not yet been specified. 

Banking and payments ecosystem could also see additional revenue 

The financial impact of the change is expected to extend beyond individual payment applications. 

Estimates cited in the report put the potential additional annual revenue for the banking ecosystem at ₹16,000-17,000 crore. Yes Bank was estimated to see a 6-12% increase in profit before tax under the new framework. 

The charge for eligible person-to-merchant payments above ₹2,000 has been set at up to 40 basis points, or 0.4%. For larger transactions, the MDR is capped at ₹300. 

The introduction of MDR on this segment changes the revenue structure for banks, payment service providers and UPI applications involved in processing eligible merchant transactions. 

For Paytm and MobiKwik, Wednesday’s share-price gains came immediately after that change was announced, with investors responding to the possibility of additional revenue from a part of the UPI merchant-payment business that had previously operated without MDR.