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Processing charges a drag on fast-growing payments startups

Economic TimesEconomic Times · 7m
Processing charges a drag on fast-growing payments startups

Digital payment startups in India are facing financial challenges despite an increase in business volume. The rising operating costs, particularly payment processing charges, are impacting the profitability of these companies. The lack of Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions is adding to their financial woes. Startups like PhonePe, BharatPe, and Cred have seen a significant increase in payment processing charges, negating their revenue growth. Established fintech firms, such as Paytm and CCAvenue, also face similar challenges. The cost of supporting business growth and maintaining transaction settlement systems are contributing to the high operational expenses. The subsidy offered by the finance ministry to banks does not fully compensate for the losses incurred.

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