Fintech Transaction Fee Models: What Are Indian Apps Charging

The Fee Pressure Point: Why Transaction Charges Matter in Indian Fintech

Transaction fees are a core part of the revenue model for many Indian fintechs — from payment gateways to embedded-finance platforms. With margins under pressure and growth costs rising, how platforms charge and who bears the cost (consumer vs merchant vs platform) becomes a strategic lever. According to a recent report, fintechs that generate 40-70 % of revenue from fees are more likely to achieve early profitability.

In India, the context adds complexity: the Unified Payments Interface (UPI) ecosystem remains largely fee-free for consumers, and regulations are debating merchant fee structures. Against this backdrop, fintechs must design fee models that balance scale, sustainability and regulatory optics.

Insight: A fee model isn’t just about charging — it signals who the platform values (consumer vs merchant) and affects how the platform scales.

For Indian fintechs, transaction-fee strategy touches multiple layers: merchant acquisition, consumer stickiness, regulatory compliance and embedded economics. The next sections unpack how models are structured today.

Standard Fee Models: Merchants, Consumers & Platforms

Here’s a breakdown of common fee models in the Indian fintech context, touching on merchants, consumers and platform-level fees.

1. Consumer-Facing Fees: In most consumer apps (UPI wallet apps, freemium banking apps) there are minimal or no per-transaction fees. Consumer transfers via UPI remain free. For now, charging end-users is rare and popular for inclusion and scale.

2. Merchant Discount / Gateway Fees: Merchants accepting payments often pay fees — via payment gateways or acquiring banks. These fees may be a percentage of value plus fixed fee. For example: one bank announced it would charge payment aggregators 2 basis points (0.02 %) per transaction capped at ₹6 or 4 basis points capped at ₹10 depending on escrow setup.

3. Platform & Gateway Bundled Fees: Platforms that provide more than raw payments often bundle fees. These include a mix of transaction percentage, fixed fee, value-added services, subscription or tiered models. The point: the “payment fee” is just part of the bundle.

Summarising Table (Indicative):

• Consumer transfers: ~0% to user.
• Merchant acceptance (gateway): ~0.02% to 0.5%+ of value (India examples vary) plus fixed fee.
• Platform bundling (payments + services): 0.3-1.5% + value-add fee or subscription.

The challenge: Free for users means platforms must recoup costs elsewhere — often via merchant fees, upsells or value-added services.

Embedded & Value-Added Fee Structures in Fintech Ecosystems

As fintechs evolve beyond payments into lending, wealth, insurance and embedded finance, transaction-fee models also diversify.

Embedded Finance Fee Models: Platforms that embed loans, credit lines, insurance or savings into commerce flows often charge fees linked to the transaction or post-transaction behaviour — e.g., a small percentage of transaction value + origination fee + premium subscription. These models combine transaction fee + lending margin. Embedded Finance Pricing

Value-Added Features & Premium Tiers: For example, payment platforms may offer faster settlement (T+1 vs T+3) at higher fee, premium analytics dashboards for merchants, fraud protection add-ons, subscription-based models. These features allow fee diversification beyond pure transaction percentage.

Regional/tier-2-3 merchant models: In India, tier-2/3 merchants and offline merchants often pay higher fixed per-transaction fees due to cost, risk and technology constraints (QR setup, liquidity flows). Fintechs may charge a fixed fee + higher percentage to compensate the higher risk/processing cost.

Tip: When designing a fee model, align it to user behaviour (e.g., refund ratio, settlement speed) rather than charging a flat % — this drives optimisation and risk management.

The upshot: Transaction fee models are moving from blunt “percent of value” to nuanced and segmented models — tiered pricing, behaviour-based discounts, bundling, and segmentation by merchant size, risk and geography.

Looking Ahead: 2026 Fee Trends and Strategic Implications

What’s next for transaction fee models in India’s fintech space as we move through 2026?

1. Regulatory shifts: If UPI merchant fees (MDR) are introduced (0.2-0.3 %) for large merchants as reported, fintechs will need to redesign merchant pricing structures.
2. Zero-fee push for consumers: Platforms will maintain free user transactions but monetize through merchant-facing products or value-add services, especially as user expectations harden.
3. Micro-segment pricing: Tier-2/3 merchants, high-risk segments or cross-border flows may face higher fees; large enterprises may benefit from volume discounts or flat-fee models reducing percentage cost.
4. Bundled ecosystem pricing: Fintechs will charge lower % for pure payments but recoup via other services (credit, analytics, subscriptions) — shifting the perception from “fee for payment” to “fee for integrated service.”
5. Transparency and un-bundling: With regulatory scrutiny rising (e.g., pass-through of charges, clarity on fees), fee models must be clearly communicated, no hidden “platform fees” or ambiguous charges.

For fintech founders and operators, the strategic questions include: “Which side pays the fee (user or merchant)?”, “How do we scale value-added services to protect margin?”, and “How do we align with regulatory changes while maintaining pricing clarity?” The answers will determine not just growth, but sustainability in 2026 and beyond.

The future of fintech transaction fees in India will favour platforms that align pricing to value, behaviour and risk — not just volume.

Frequently Asked Questions

1. Do consumers pay transaction fees on UPI in India?

No. As of mid-2025, standard UPI transactions for consumers are free.

2. What do merchants typically pay for payment acceptance in India?

It varies: examples show ~0.02 % per ₹100 (₹0.02/₹100) for aggregator accounts at one bank, capped at ~₹6 per transaction.

3. How do embedded finance platforms charge transaction fees?

They often combine a small percentage of transaction value + value-add fee + lending margin, rather than a standalone “payments fee”.

4. Will transaction fees go up in India?

Possibly. If UPI merchant fees (MDR) are reintroduced at ~0.2-0.3 % for large merchants, fintechs may pass costs to merchants or adjust product pricing.

5. How should a fintech pick its fee model?

Align it to value delivered, segmentation (merchant size, risk, region), and clarity. Use tiered pricing and behaviour-based fees for scalability. Fintech Fee Strategy