Top banks to get lion's share of UPI fees

Mumbai: Banks with the largest number of bank accounts will be the biggest gainers as they will receive the lion's share of the fees. While third-party payment apps will receive a smaller share, the MDR will make the biggest difference to them as their business model suddenly becomes sustainable without having to look for alternative revenue streams.Using debit cards as a proxy for savings accounts, SBI is the clear leader with a 25% market share, followed by Bank of Baroda (8%), HDFC Bank (6.2%), Canara Bank (5.9%) and Union Bank (5.6%). For every Rs 2,000 paid, the merchant will pay Rs 8 as fees. Of this the issuing bank (from whose account money will be paid) will get Rs 3.2 as fees, while the bank that receives the payment (the acquiring bank) will get Rs 2.4 . Of the remaining Rs 2.4, the third-party app - PhonePe, Google Pay, Paytm, Amazon Pay or WhatsApp - will get Rs 1.6 and the bank doing the processing for the app will get 80 paise.For banks, the deal gets even sweeter. The third-party payment apps will also pay a portion of their earnings to the banks that process the transactions. The processing bank (the bank whose name appears on the UPI ID) will get a share, as will the bank processing the transaction on the merchant end. Banks also pay a small interchange fee to the National Payments Corporation of India (NPCI).In all, the fee kitty would have to be divided among seven participants - the banks where the customer and shopkeeper have accounts, the banks processing transactions at both ends, the third-party apps and the network provider, NPCI.. "The sector has long been viewed as one where scale has been built without a clear path to monetisation. A sustainable revenue model for UPI would alter that perception, improve investor sentiment and give the fintech ecosystem a significant boost," said Amrish Rau, CEO, Pine Labs.Get the latest Business News and Live updates. Download the TOI app.