UPI’s zero MDR policy key to digital growth, says Bernstein’s Pranav Gundlapalle

According to him, “The exponential growth in cashless payments wouldn’t have happened if MDR was applied,” stating that the cost savings from reduced ATM use and better credit data generation far outweigh any potential MDR revenue.

Gundlapalle added that even if MDR were allowed, intense competition would likely drive it down to zero, as banks and fintechs vie for user share.

He also pointed out that Paytm’s recent share price drop was a sentiment-driven reaction and not linked to any change in fundamentals, since MDR was never factored into earnings estimates.

Joining the discussion, Abizer Diwanji, Founder of NeoStrat Advisors LLP, supported the idea of a tiered MDR system. He said that high-value transactions, like large restaurant bills or supermarket spends, can bear minimal charges, but small-ticket payments must remain free.

Also Read: View | Proposed MDR on Digital Transactions: A Step Backward for India’s Digital Dream

“We are a Robin Hood country—premium users should subsidise smaller ones,” he said, adding that services offered for free are not valued, which hurts long-term sustainability.

Diwanji emphasised that to fund future investments in security and tech, payment platforms must evolve real business models, not depend indefinitely on subsidies.

For the entire discussion, watch the accompanying video

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