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Policy · Financial Services

PhonePe supports new UPI merchant discount rate framework

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PhonePe logo
Date
Company
PhonePe
What it does
Digital payments and financial services
Kind
Policy
Stage
late
Sector
Financial Services

What they do

PhonePe provides a digital platform for UPI payments, insurance, investments, and merchant services to over 22 crore Indian users

What happened

The company welcomes the new 0.4% MDR (merchant discount rate; a fee paid by merchants to process payments) on P2M transactions exceeding Rs 2,000

Why it matters

CEO Sameer Nigam stated that ending government subsidies for UPI payments is necessary for the industry to achieve sustainable, long-term unit economics

The details

  • Beginning October 15, 2026, NPCI plans to apply a 0.4% MDR on commercial store transfers exceeding Rs 2,000.
  • Payments under Rs 2,000 stay charge-free, safeguarding nearly 95-96% of everyday retail payment traffic from extra expenses.
  • PhonePe CEO Sameer Nigam stated that payment firms lose money and need operational earnings instead of state-funded payouts.
  • The updated rules limit processing fees to Rs 300 whenever payments hit or cross Rs 75,000.
  • P2P (person-to-person) funds sent directly between private individuals incur no fees at any sum.
  • PhonePe is preparing for an upcoming public float comprised purely of an offer for sale by current equity holders.

The bigger picture

  • The Indian government has funded digital transaction incentives for five years since processing charges were removed during the pandemic.
  • Industry analysts project that applying these processing fees could establish a Rs 22,000 crore revenue pool by FY28.
  • PhonePe recently emerged as the lowest bidder to provide retail fuel payment hardware across the nationwide network of IOCL.

About the business

  • PhonePe offers customer financial services spanning UPI transfers, mutual funds, insurance, gold investments, and credit.
  • The firm serves enterprise clients through tools like payment gateways, POS (point of sale) machines, and merchant loans.
  • PhonePe deploys over 200 internal AI agents to handle user support, code adjustments, and fraud investigations.
  • The company manages 10 billion transactions monthly while relying on a core support staff of 500 representatives.
  • Its data platform PhonePe Pulse shares localized operational trends and business statistics for regional merchants.

What happens next

  • PhonePe aims to execute an initial public offering through an offer for sale by existing owners.

The deal

Type
policy

Founders

  • Sameer Nigam, Founder & CEO
  • Rahul Chari, Founder & CPTO

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