India's payment companies are looking beyond UPI transactions to build broader merchant-service businesses. BharatPe COO Sabyasachi Senapati said, "MDR will not be a significant revenue driver for companies." Fintechs now focus on lending, analytics, and loyalty services to earn more. They use payments as an entry point to offer these tools.
India's payment companies are looking beyond UPI transactions to build broader merchant-service businesses as merchant discount rate (MDR) creates a new, albeit limited, revenue stream from select transactions.
The new MDR applies to person-to-merchant (P2M) UPI transactions above ₹2,000, leaving much of everyday merchant payments outside its ambit. This is prompting fintechs to focus on lending, reconciliation, analytics, loyalty and other services that can generate higher-value revenue from merchants.
MDR unlikely to be a major revenue driver
BharatPe COO Sabyasachi Senapati said around 95% of transactions, particularly in smaller towns, will not attract MDR as average transaction values remain below ₹2,000.
"MDR will benefit the overall ecosystem by supporting continued investment in payments infrastructure, technology and distribution, but it will not be a significant revenue driver for companies. The larger opportunity will continue to be in building a stronger merchant proposition through lending and value-added services such as Sound Speakers, instant settlements and bill payments," he said.
The distinction matters most for fintechs serving smaller merchants, where payments remain largely a customer-acquisition and engagement layer rather than a standalone revenue stream.
Payments as an entry point to wider services
Mintoak cofounder and CEO Raman Khanduja said the opportunity lies in deepening the relationship with merchants rather than simply monetising the payment base.
"Payments are the only financial service that touches a merchant's business every day, making them a natural entry point to understand business needs and offer adjacent services. The long-term economics will therefore come from combining sustainable payment revenues with deeper financial and business services," he said.
Larger merchants could become the focus
For larger merchants, however, MDR could change the economics of acquiring and servicing them. Ashish Singhal, cofounder of CoinSwitch and Lemonn, said the fee would apply to only a small portion of merchant transactions, while providers would retain only a fraction of the MDR after sharing it with other participants in the payments ecosystem.
"The race is no longer for the most QR codes, but for the merchants whose average ticket clears ₹2,000," Singhal said.
He expects payment companies to increasingly bundle merchant credit, reconciliation and settlement software, smart POS and soundboxes with billing, GST invoicing and inventory capabilities. Credit-on-UPI acceptance could also become a focus, while loyalty and analytics are likely to be used mainly to retain merchants.
From QR-code scale to merchant monetisation
The shift could therefore move the industry away from measuring success by the number of QR codes deployed toward the quality and monetisation potential of acquired merchants.
For fintechs, MDR could add another margin line, but the bigger opportunity lies in using payment data and daily merchant engagement to cross-sell financial and business services. As Singhal put it, "MDR pays for the rails; services pay for the business."