Paytm projects payment margin uplift following new UPI fee structure
Fintech firm Paytm expects a 2.5 basis point improvement in processing margins as NPCI implements a 0.4% merchant discount rate on UPI transactions over Rs 2,000.
Paytm parent company One97 Communications has signaled that the introduction of a 0.4% merchant discount rate (MDR) on UPI transactions exceeding Rs 2,000 will provide a tailwind for its payment processing margins. The company estimates an uplift of approximately 2.5 basis points, noting that its processing margins are already trending above 4 basis points due to higher-margin products like UPI credit cards.
The firm’s Q2 FY27 results highlight a significant turnaround, with net profit rising to Rs 225 crore from Rs 21 crore in the previous year. Revenue reached Rs 2,648 crore, a 28% increase driven by sustained growth in merchant subscriptions and the distribution of financial services. Despite the optimism surrounding UPI MDR, the company maintains that its core profitability is anchored in loan distribution and technology services rather than payment processing fees.
Operational challenges persist, however, as payment processing charges—the company's largest expense—rose by 28% to Rs 805 crore. To counter these costs, Paytm is scaling its AI-driven lending products and cloud services. The company remains focused on increasing its merchant base, which currently stands at 5.2 crore registered users, of which 1.64 crore are active subscribers.