New Delhi, Sept. 16 -- For years, the UPI (unified payments interface) has had an unusual economic model. Banks invested in the underlying infrastructure, while companies such as PhonePe, Google Pay and Paytm spent billions acquiring consumers and merchants, distributing QR (quick response) codes and soundboxes, improving payment experiences and fighting for market share. Yet, the transaction at the centre of all this generated virtually no direct revenue for most of them.

UPI processed Rs.29.8 trillion worth of transaction in August, with merchant (person to merchant or P2M) payments accounting for roughly Rs.9 trillion. Annualised, that is about Rs.107 trillion of P2M value, of which roughly Rs.72 trillion comes from transactions above...