MDR On UPI Transactions Can Increase Competition: Paytm CEO

Paytm founder and CEO Vijay Shekhar Sharma said that the introduction of merchant discount rate (MDR) on UPI payments will result in a rise in revenue for the fintech major but also has the potential to intensify the competition.

MDR is the fee paid by merchants to banks and payment service providers involved in executing a transaction.

Speaking during Paytm’s Q4 FY25 post-earnings call, Sharma said that the company expects to see a margin structure similar to what exists today for credit and debit card transactions, where some merchant categories yield higher net margins than others, if MDR is allowed for UPI transactions.

“It’s similar to what we see today with credit and debit cards, we’re quite familiar with that dynamic. Some merchants allow for a slightly higher net payment margin, while others offer a slightly lower one. So yes, we understand the role of competitive intensity and how it affects the net payment margin within the broader context of that overall gap,” he quipped.

Meanwhile, responding to a question about a 25 basis points MDR on UPI transactions resulting in a revenue gain of 5-8 basis points of its gross merchandise value (GMV), Sharma said, “Logically yes, however that’s not a conservative number.” 

He highlighted that the current cost for enabling payments is already accounted for in Paytm’s financials, so any MDR revenue would largely contribute straight to the company’s EBITDA. 

Paytm’s GMV stood at INR 5.1 Lakh Cr in the March quarter of 2025.

However, Sharma also cautioned that the competitive landscape could affect margins, especially among larger merchants, and that the net payment margin would vary depending on the merchant segment.

“So, when we think about the likely scenarios, though it’s a bit premature since we don’t yet know exactly which segments we’re referring to, we do take into account that for larger merchants, there will be some competitive intensity,” the Paytm CEO and MD said. 

While the introduction of MDR on UPI transactions is a long-standing demand, the issue has gained steam in recent months with the payments industry reiterating its stand.

In its earnings statement, Paytm said, “The industry expects MDR on UPI for large merchants to be allowed in the near future, which will result in incremental monetisation opportunities. Our payment processing margin guidance will be updated once we have more details and clarity on MDR on UPI.”

Paytm’s consolidated net loss remained almost flat year-on-year at INR 544.6 Cr in Q4 FY25 due to an exceptional loss of INR 522.1 Cr. Excluding the exceptional items, the fintech almost broke even, posting a loss of INR 23 Cr.