UPI-dominant YES Bank will muscle up for more business post-MDR
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Banks in India, after over six years of a zero-MDR (merchant discount rate) regime on Unified Payments Interface (UPI) ecosystem, will start to re-evaluate product lines and solutions with a closer lens, as monetisation of the UPI ecosystem starts next month.
One of the biggest beneficiaries amongst all the banks in India is YES Bank, which holds a dominant position both as an issuer bank (payer payment service provider) and the acquiring bank (payee payment service provider) in India (see table).
YES Bank is gearing up to focus on building for agentic payments, credit lines on UPI, cross-border payments and other product lines.
"Very early on the bank realised that technology could open doors, which could not be done through just physical branches. With MDR, we will have more backing of all stakeholders; we have now captured the cone of the iceberg. says Naveen Chaluvadi, chief digital officer, YES Bank.
Agentic payments, cross-border transactions into focus
There will be more focus on agentic AI payments (beyond the app-less world), credit lines on UPI, express loans, cross border payments and biometric authorisations, Chaluvadi told Fortune India.
On whether the bank needs to invest more towards UPI-related infrastructure, Chaluvadi said that “YES Bank has balanced its investment with co-creation strategy” of working on alliances with fintechs, digital platforms and open-banking solutions.
Around 63% of all UPI transactions by volume are the person-to-merchant (P2M) category, the balance are P2P. According to recent notification, a standard 0.4% MDR will be applied from October 15 onwards for only P2M transactions which are above ₹2,000 amount.
Approximately, 96% of all P2M transactions are exempt from a charge as they are either below the ₹2,000 threshold or covered by the zero-MDR framework for small merchants.
YES Bank has been the leading UPI Payee PSP Bank with a 57.5% market share and No. 2 UPI Payer PSP Bank at 38.7%, alongside strong positions in Aadhar enabled
payment system (AePS - 28.3%), NEFT (21.6%), IMPS (8.2%), and NACH (15.2%), according to its FY26 annual report.
YES Bank had expanded into digital banking well before UPI came into being. In 2010-11, it partnered with Nokia and mobile payments company Obopay to build an early mobile money and wallet platform called Nokia Money.
In 2011-12, it launched micro-banking outlets, where mom-and-pop store shop owners got terminals or mobile technology to help their local customers make payments, fund transfers (via NEFT).
When UPI launched in 2016, YES Bank tied up with 50 partners and even when the moratorium hit the bank in 2020, it still had a 42% market share on UPI.
A standout beneficiary
Bankers are working out the details on how much they could gain through revenues but the broad maths from analysts shows that the total annual revenue pool being estimated for the entire UPI ecosystem is between ₹14,000 to ₹20,000 crore. JPMorgan has estimated this to be around ₹17,000 crore from the new MDR structure, including approximately ₹11,700 crore potentially accruing to issuer and acquiring banks.
Citi has identified YES Bank as a standout beneficiary of the new UPI charges. The new charges will increase the potential earnings benefit for YES Bank, as UPI transactions start generating fee income.
The YES Bank stock has risen 31.2% in the past six months to ₹23.17 at the BSE.
“We acquired the market share domination because we were doing things right. We are not worried about market share in coming years, as long as we are growing in value, volume and not losing money for the bank or the customer or succumbing to fraud or cybersecurity,” Chaluvadi said.