MDR or no MDR: that is the big question for India’s payments apps and the UPI frontrunners — PhonePe, Google Pay and Paytm — or even the likes of CRED, Groww, Flipkart’s Super.Money, Navi and others which are looking to build their own UPI empires.

Earlier this month, speculation emerged that the Indian government is close to bringing in a merchant discount rate (MDR) regime or a commission structure on UPI transactions for these players, especially for high-value payments. This built up enthusiasm for the future of Paytm and MobiKwik.

However, on June 11, the Finance Ministry firmly denied these reports, calling them “false, baseless, and misleading,” and reiterated its commitment to promoting digital payments without imposing MDR charges.

This official clarification triggered and MobiKwik on the bourses, with the former seeing the biggest impact.

In fact, Paytm’s big push in the past few quarters on consumer payments has been built around the premise of MDR coming into play. A large part of the future narrative for both Paytm and MobiKwik have been set around MDR.

This does impact the likes of Navi, PhonePe and others that are looking to join the IPO rush. While Groww is also eyeing a listing, its primary focus is not on UPI. However, our analysis of the UPI players includes Groww, because it represents an outlier in the group with a very high ticket size — more on this later.

MDR Future For UPI Apps

The stock market crash for Paytm and MobiKwik epitomises the overall investor sentiment for the fintech and payments sector as hopes for MDR-related earnings were dashed. Without MDR, the payments app will continue to process a high volume of UPI transactions at no charge, making profitability elusive — or , as we called it two years ago.

The problem persists. Paytm, MobiKwik, CRED, PhonePe and the likes remain reliant on other business lines like lending, insurance, and merchant services. In Paytm’s case, in Q4 FY25, the company’s payment services revenue fell 33% year-on-year, while financial services grew 79%.

Paytm stock’s steep drop this week was its worst single-day performance since February 2024, which underlines ongoing concerns over its long-term business model.

The MDR episode now adds to the challenges being faced by Paytm, which is under scrutiny from the RBI and SEBI over compliance and governance issues. These regulatory pressures continue to weigh heavily on investor confidence.

The announcement of zero MDR on UPI transactions has now significantly changed how fintech apps in India will generate revenue.

This comes amid a rejig by NBFCs and banks on their lending partnerships with UPI apps that also offer loan distributions. Any slowdown in lending revenue will only add to the revenue pressure for fintech super apps such as Paytm, MobiKwik and others that are looking to leverage UPI to build a big loan portfolio.

What this means is that UPI apps are seriously pushing for MDR to at least cut some of the reliance on lending partnerships for revenue.

Who Stands To Benefit?

Since MDR fees were eliminated in 2020 to encourage digital payments, fintech firms have since reportedly lost over INR 10,000 Cr in potential yearly income. As a result, startups and listed companies will have to rethink their strategies and innovate beyond simply selling financial products to users.

At the moment, speculation is that small payments will remain free, while MDR will be for payments over INR 3,000, which could create a fresh revenue pool of INR 6,000-12,000 crore per year. Some apps are already charging premiums on cross-border UPI transfers, especially in corridors like India-UAE.

Some apps have already shifted to commerce-focussed ecosystems. For instance, platforms like POP use reward-based shopping and in-app merchant deals to keep users engaged and boost transaction volumes.

Others are offering software services tailored for specific groups, such as MSMEs, with features like invoicing, inventory tracking, and GST tools available through monthly subscriptions. Agricultural fintech apps are also bundling UPI with crop-related services to appeal to farmers.

There’s also growing interest in monetising large-value transactions.

Subscription models are another path. For example, PhonePe Switch offers faster settlements and premium support for INR 99 per month.

Meanwhile, UPI continues to grow rapidly. In May 2025 alone, it handled 18.68 Bn transactions worth INR 25.14 Lakh Cr, amounting to a 33% rise in transaction numbers and a 23% increase in value compared to the previous year.

The user base also surged, growing from 350 Mn to 500 Mn within a year. Around 63% of these transactions were person-to-merchant, showing how UPI has become a part of everyday spending.

“For startups operating UPI apps, revenue models have long shifted to a broader strategy — acquire users through UPI, then monetise via financial products like credit, insurance, and investments. However, this playbook has become saturated,” said Bhargav Errangi, founder of POP UPI.

However, the average ticket size for the market leaders is not that great, especially for Paytm, which has neither too high a market share nor does it have a high ticket size.

“With little differentiation between apps, user churn is high and the gap between acquired users and monetisable ones continues to widen,” Errangi further said.

Where Does Paytm Stand?

Payment apps have also shifted focus from large transactions to high user engagement and frequent usage. Without merchant fees, growth now depends on transaction volume and user base, not revenue per payment.

As Plutos One founder Rohit Mahajan puts, “Fintech startups must reimagine monetisation, not through friction like MDR, but by building smarter layers on top of UPI. The real ROI lies in scale, engagement, and long-term cost efficiency.”

Flipkart-backed super.money, for instance, , with volume rising from INR 3,130 Cr to INR 5,924 Cr between November 2024 and May 2025. It also recently climbed from 7th to 5th in the rankings, overtaking CRED.

Post Paytm’s Q4 results, CEO Vijay Shekhar Sharma said the company is turning its focus fully on being a payments app, rather than a super app. “Keeping the payments-led super app concept is better than calling super app first, payments second,” the CEO said, claiming that monthly transacting users (MTU) on the app increased to 7.2 Cr in Q4 FY25.

But is this scale enough to unlock the MDR value if and when it arrives. The other players are swiftly catching up to Paytm while PhonePe and Google Pay are well ahead in terms of volume. India’s OG payments app is stuck in the middle — perhaps the worst place to be because there’s pressure from both ends of the competition.

Is Swiggy Set For Rally?

As the MSCI India Standard Index seems poised to add Swiggy to its roster, the stock is expected to receive estimated inflows of $385 Mn, with 93.8 Mn shares being added to the index. This is likely to be a big boost for those shareholders that bought into the Swiggy stock during its lows in late 2024 and early 2025.

Ahead of this expected index rejig, Swiggy share price has surged over 14% in the past month. However, this past week was less than favourable for the food delivery and quick commerce giant, as the stock tumbled over 5% between Monday’s opening and Friday close.

There is also some encouragement for short-term traders from experts and brokerages, who expect the Swiggy share price to flatten and form a characteristic saucer-like curve going from bearish to neutral and eventually bullish. Will this play out as they expect?

Markets Watch: New IPOs, Deals & More

• Peak XV-backed fintech unicorn Pine Labs plans to file its DRHP by the end of June for its IPO where it’s said to be raising $700 Mn at a valuation of up to $5 Bn


• Fintech major PhonePe has offloaded a 5% stake in geotech major MapmyIndia via an open market transaction for INR 486.03 Cr


• The estate of late investor Rakesh Jhunjhunwala has exited Nazara by divesting its remaining 5.07% shareholding in the online gaming major via open market transactions


• B2B ecommerce company ArisInfra has set a price band of INR 210 to INR 222 for its IPO, which is set to open on June 18

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