PhonePe founder and Chief Executive Officer Sameer Nigam has strongly advocated for the introduction of a merchant discount rate on select Unified Payments Interface transactions, emphasizing that India’s digital payments ecosystem requires a sustainable revenue model to support ongoing investment, innovation, and expansion. Speaking at the Business Standard BFSI Insight Summit in Mumbai, Nigam highlighted that escalating expenses associated with operating critical payment infrastructure—specifically in areas like cybersecurity, fraud prevention, know-your-customer processes, and regulatory compliance—make it increasingly unsustainable for firms to invest without generating direct transaction revenue. Nigam stressed that a vibrant payments market cannot exist without underlying financial monetization, noting that the absence of direct revenue streams has restricted the sector’s overall growth capacity while operational and security demands continue to multiply at scale. Under the guidelines announced by the National Payments Corporation of India, a 0.4 percent MDR is slated to apply to specific person-to-merchant transactions exceeding ₹2,000, capped at ₹300 per transaction, while person-to-person transfers remain completely free and roughly 96 percent of small merchant transactions are exempted from the charge. However, the NPCI has deferred the planned October 15 implementation of the fee structure until after Diwali, with a revised effective date still awaiting formal notification. Addressing broader industry challenges, Nigam also pushed back against common criticisms regarding foreign ownership within India’s fintech landscape, arguing that major platform players invested substantial capital to build out UPI infrastructure following public calls for private sector participation. Pointing to PhonePe’s own journey, which is majority-owned by US retail giant Walmart, he revealed that the company invested approximately $1.7 billion to $1.8 billion over the past decade while absorbing significant operational losses to establish robust payment systems. Ultimately, Nigam argued that enabling sustainable monetization mechanisms like MDR is crucial for preserving infrastructure resiliency, encouraging long-term enterprise investments, and safeguarding the future growth trajectory of India’s digital economy.
High Operational Costs and Cybersecurity Risks Demand Revenue Model for UPI Ecosystem
