UPI needs a monetisation model to sustain growth, not boost profits: Pine Labs CEO

Pine Labs CEO Amrish Rau says it’s time for India’s Unified Payments Interface (UPI) to start paying for itself. “For a long period of time… we have been very keen to bring some sort of monetisation model,” Rau said, as the government moves to allow charges on UPI transactions for the first time.Rau said the industry has poured roughly ₹1.5 lakh crore (₹1.5 trillion) into UPI over the past decade. He estimated banks alone spend close to ₹10,000 crore a year just to keep UPI infrastructure running, while fintech companies invest a further ₹5,000 crore annually to expand transactions across the country. “I don’t think this is about profit or profiteering,” he said. “I think it is much more about growth.”The policy shift behind the debateUPI is the real-time payment system that lets people transfer money instantly using just a phone number or QR code, and it has been free to use since it launched. That’s now set to change.The government has moved an amendment to the Payments and Settlements Act, 2007, that would give the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) — the nonprofit body that runs UPI’s backend infrastructure — the authority to frame rules on how UPI payments may be charged and who bears the cost.No official numbers have been finalised. But market expectations point to person-to-person payments — transfers between individuals — staying free, since no merchant is involved.Payments to merchants above a certain size could be charged, with ₹2,000 emerging as the widely discussed minimum threshold. Small merchants, those with annual turnover below ₹1.5–2 crore, are expected to be exempt.Ramesh Lakshminarayanan, Group Head of Information Technology and Chief Information Officer at HDFC Bank, cautioned that nothing is confirmed yet. “These are all right now conjectures and guesses,” he said, adding that the government and NPCI appear to be approaching the issue in a very calibrated way.Why the industry says costs need to be recoveredLakshminarayanan pointed to rising cybersecurity costs as a key driver behind the push. He noted that a single ATM withdrawal once triggered one hit to a bank’s core banking system; today, the same cash withdrawal habit translates into far more digital transactions hitting that infrastructure. “The transactions per second on core banking have gone up,” he said, adding that hardware costs have also risen due to global supply chain pressures.Mahesh Ramamoorthy, Chief Information Officer at Yes Bank, said the immediate priority isn’t profit but sustainability. “We know our costs,” he said, but argued the more pressing question is how any new revenue would be distributed among banks, fintechs, and other participants.Growth has been slowingRau argued that framing the debate around profit misses the bigger picture. He said digital payment acceptance in India stands at about 35%, compared to roughly 90% in Brazil and China. UPI transaction growth, he noted, has been decelerating — from 60% year-on-year growth three years ago, to 40%, to just under 30% most recently.He drew a comparison to Brazil’s Pix payment system, which has reached 91% penetration since launching in 2020 — a system that, unlike UPI, has always charged a merchant discount rate (MDR), the fee merchants pay for accepting digital payments.A Jefferies report has estimated that if the ₹2,000 threshold holds, Pine Labs’ earnings before interest and tax (EBIT) could rise 9% and profit could climb 23% by fiscal year 2028. Rau declined to confirm the figures, saying that isn’t how the company is thinking about the change. He said every ₹1 lakh crore in new digital spending adds roughly half a percentage point to gross domestic product (GDP), citing broader economic research on digital payments.What innovation could followRau and the bank executives pointed to areas that new revenue could unlock:B2B payments: Rau said business-to-business payments remain largely unaddressed by UPI despite the large sums of money involved.Agentic payments: Rau also pointed to AI-driven “agentic” payments — automated transactions initiated by AI systems — as an emerging global category where UPI could compete with stablecoins.SME lending and invoice discounting: Ramamoorthy and Lakshminarayanan flagged the small and medium enterprise (SME) sector, including invoice-based payment and discounting tools, as an underdeveloped opportunity.Cross-border acceptance: Rau said UPI’s global ambitions require investment, drawing a comparison to China UnionPay’s international expansion. “When I am walking on the streets of France, I don’t get to see UPI acceptance,” he said.Lakshminarayanan also cited past UPI innovations — delegated payments (allowing one person to authorise payments on another’s behalf without a bank account), UPI Lite, and wallet integrations — as proof that investment translates into new features, provided usage grows.What happens nextThe amendment must still pass before RBI and NPCI can formally frame charging rules. No timeline has been confirmed for when a threshold or fee structure would take effect.For the full interview, watch the accompanying videoCatch all the latest updates from the stock market here

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