India's payment firms jump as UPI fee boosts revenue outlook (updated)

Pine Labs

16/09/2026 06:25

Adds paragraph 2, details from paragraph 4 onwards
0.4% fee applies from October 15 to select merchant UPI transactions above 2,000 rupees
Citi sees 160 billion to 170 billion rupees in annual revenue pool from fees
Paytm, Mobikwik, Yes Bank and Axis Bank rose in early trading
JP Morgan says change improves long-term sustainability of digital payments
By Bharath Rajeswaran and Jaspreet Kalra
Sept 16 (Reuters) - Shares of Indian payment firms advanced on Wednesday, a day after the national payments authority introduced a fee on select merchant transactions above 2,000 rupees (about $20) made via a popular homegrown interface.
The 0.4% fee, which will kick in from October 15, marks the end of an over six-year period of free payments made through the Unified Payments Interface, opening up fresh revenue lines for banks and payment firms that have so far absorbed costs for such transactions.  
Paytm PAYT.NS, Axis Bank AXBK.NS and Yes Bank YESB.NS gained between 2% and 8% in early trade. Pine Labs PINL.NS and One Mobikwik ONEM.NS rose about 2.2% and 6.5% before reversing to trade 3.2% and 1% lower.
Brokerages called the move "structurally positive", but said the earnings benefit would vary by transaction mix, exemptions and the eventual sharing of fees among stakeholders.
Citi estimated an annual revenue pool of 160 billion rupees to 170 billion rupees, with about 60% going to banks, 25% to app providers and 15% to aggregators. It named Yes Bank the standout banking beneficiary, followed by Bank of Baroda BOB.NS, Punjab National Bank PNBK.NS and IndusInd Bank INBK.NS .
Bank of Baroda and Punjab National Bank gained 1% and 1.5%, respectively, while IndusInd Bank reversed early gains to trade marginally lower on the day.
Industry executives ​have long argued that growth in digital payments had become harder to sustain as free transactions limited their ability to invest. By comparison, credit cards in India typically attract about 1.5% and debit cards up to 0.9% in fees, called the merchant discount rate.
"The framework marks a shift away from the zero-MDR regime and establishes a transaction-linked revenue model ... with the aim of strengthening the long term sustainability of UPI," said analysts at JP Morgan. 
For fintechs, Goldman Sachs expects 40%-70% upside to its fiscal year 2028 Paytm EBITDA estimate in a "high-end" scenario. Jefferies raised Paytm's target price to 2,150 rupees and Pine Labs' to 235 rupees, while Emkay lifted its targets to 2,400 rupees and 230 rupees, respectively.
The National Payments Corporation of India, the operator of ​the UPI, retained zero MDR for small merchants and person-to-person transfers, and capped fees on essential services and capital-market transactions.
     
($1 = 95.9050 Indian rupees)

(Reporting by Bharath Rajeswaran in Bengaluru and Jaspreet Kalra in Mumbai; Editing by Harikrishnan Nair)
((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))