Mumbai: Indian payment firms have seen their shares rise as a fee on select UPI merchant transactions has strengthened expectations for higher revenue.
The National Payments Corporation of India (NPCI) has introduced a 0.4 percent fee on certain Unified Payments Interface (UPI) merchant transactions above ₹2,000. The new charge will take effect from October 15 and ends more than 6 years of free payments through the system for the affected transactions.
Paytm, Axis Bank and Yes Bank gained between 2 percent and 8 percent in early trading. Pine Labs and One MobiKwik rose about 2.2 percent and 6.5 percent before giving up those gains. Pine Labs later traded 3.2 percent lower while One MobiKwik was down 1 percent.
The fee change has created new revenue opportunities for banks and payment firms that have absorbed the cost of processing UPI transactions. UPI has become a major part of India’s digital payments system. The platform processed 24 billion transactions worth about $311 billion in August.
The expected earnings benefit will depend on the mix of transactions and the exemptions that apply. The eventual distribution of the fee among banks, payment apps and aggregators will also determine the impact on individual companies.
Citi has estimated an annual revenue pool of ₹160 billion to ₹170 billion ($1.7 to $1.8 billion). About 60 percent of the pool could go to banks. App providers could receive 25 percent while aggregators could receive 15 percent.
Citi identified Yes Bank as the main potential banking beneficiary. Bank of Baroda and Punjab National Bank were also highlighted, followed by IndusInd Bank. Bank of Baroda gained 1 percent while Punjab National Bank rose 1.5 percent. IndusInd Bank reversed an early rise and traded marginally lower.
The new framework does not mean all UPI payments will carry a fee. Person-to-person payments remain free. The revised charge applies to specified merchant transactions above ₹2,000. The changes mark a shift in the revenue structure of India’s widely used digital payments network.
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