Banks fund India's digital payments while fintechs reap the revenue

UPI cost burden reaches Rs 8,500 crore annually as third-party apps dominate customer engagement

Indian banks are bearing an annual ₹8,500 crore cost burden to operate the country’s digital payments infrastructure while fintech competitors leverage this network to generate revenue from lending and financial services, according to a report by fintech firm Zeta.

 

“A central irony in the UPI model is that banks shoulder much of the cost while the rest of the ecosystem captures its value and visibility with users. With zero MDR (merchant discount rate) in place, nearly all operating costs, transaction processing, infrastructure maintenance, fraud mitigation, and compliance, fall on issuing banks. Industry estimates peg annual UPI operating costs at ₹10,000