Journal De Bruxelles - Pine Labs CEO Foresees Rs 80-230 Crore Revenue from New UPI Merchant Discount Rate

Pine Labs, one of India’s leading fintech infrastructure providers, anticipates generating between Rs 80 crore and Rs 230 crore in annual revenue due to the National Payments Corporation of India’s (NPCI) introduction of a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions. Amrish Rau, co-founder and CEO of Pine Labs, confirmed this projection during the company’s second-quarter FY27 analysts’ call, noting that the new revenue stream could significantly bolster the firm’s financial performance.

The NPCI has mandated a 0.4% MDR on person-to-merchant (P2M) UPI transactions exceeding Rs 2,000. For context, Pine Labs reported an operating revenue of Rs 806.2 crore in Q2 FY27 alone. The introduction of this fee structure marks a pivotal shift in the economics of digital payments in India, transitioning UPI from a zero-cost utility for merchants to a monetizable channel for high-value transactions.

To capitalize on this change, Pine Labs has announced plans to deploy approximately 10 lakh soundboxes across India. Historically, the company had overlooked certain large merchant UPI payments that were processed through competitors’ soundboxes because these transactions previously carried no revenue potential. Rau explained that while merchants often use point-of-sale (PoS) machines integrated into their billing systems for the majority of transactions, a significant portion—ranging from 10% to 20%—often slips through alternative devices like soundboxes placed on the counter.

"Until now, Pine Labs ignored certain large, merchant UPI payments that slipped to competitors’ soundboxes due to a lack of monetisation," Rau stated. "Earlier, our approach was not to bother with it. As it is UPI, there is no monetisation out of it. So let it go where it is going. Now I am saying, no, no, no, I want that 20% of transactions also to come to me and might as well put up a soundbox out there and keep it."

The strategic pivot toward soundboxes is supported by data showing that 75-77% of transactions on Pine Labs’ PoS devices are now UPI-based, with only 25% remaining card-based. This high volume of digital transactions positions the company to earn recurring revenue from the newly introduced MDR.

However, the shift to transaction-based revenue is altering the traditional business model for hardware. For years, Pine Labs and its peers relied on leasing PoS devices to merchants, charging a monthly rental fee in addition to per-transaction costs. Rau indicated that this dual-cost structure is becoming unsustainable for merchants under the new regime.

"Merchant cannot afford to be paying Rs 125 monthly rent on top of 40 basis points on every transaction. It is just price prohibitive for them," Rau said. "So we think that market going forward will have one of the two commercials attached to it. And from our standpoint, it will be much more on the transaction side."

This sentiment aligns with earlier guidance from management during the Q1 FY27 earnings call, which noted that 25-30% of new terminal deployments already required merchants to pay for hardware upfront. The industry is gradually moving away from subsidized hardware models toward direct cost recovery through transaction fees.

Beyond immediate revenue opportunities, Pine Labs is also positioning itself for the future of commerce with "agentic payments." Rau told analysts that the company is "fully ready" to facilitate purchases initiated by consumer AI assistants, such as Muse or Instinct. The firm has demonstrated this capability using its proprietary Pine Labs Payment Protocol (P3P) at events like Global Fintech Fest 2026.

Despite technical readiness, Rau acknowledged a barrier to adoption: consumer trust. "Consumers are still extremely uncomfortable to give their cards and their bank account information to personal agents," he said. To address this, Pine Labs has been working on solutions over the past two months and is increasingly open-sourcing its AI agents and guardrails through platforms like AgenticOrg and grantex.dev to build infrastructure for agentic commerce.

The company also reported significant progress in its issuing platform, which generates revenue from credit issuance, acquiring processing services, and the distribution of prepaid cards and gift cards. For the first time publicly, management disclosed that the issuing platform is generating Rs 100 crore in annual revenue. The platform is expanding its use cases beyond traditional gifting to include gaming platforms such as Roblox, Xbox, and Nintendo.

Looking ahead, Pine Labs plans to launch an employee tax benefit card by late November or early December. Additionally, the company has expanded its payment gateway services to India’s top four quick commerce platforms, facilitating installment payments for electronics and consumer durables. Rau highlighted that Pine Labs was one of the enabled payment gateways during Flipkart’s Big Billion Days sale, signaling continued trust from major retailers.

The fintech firm also secured a deal with one of the country’s largest consumer billers, which is set to go live in Q3. These developments underscore Pine Labs' effort to diversify its revenue streams and maintain its competitive edge in both online and offline payment processing as the Indian digital payments landscape evolves.

E.Goossens--JdB