Paytm is the third-largest app in terms of the number of UPI transactions it handles.Shares of One97 Communications Ltd, the parent company of digital payments major Paytm, jumped over 10% on Monday on the NSE, hitting a fresh 52-week high, after global brokerage Bernstein maintained its ‘outperform’ rating on the company and raised its price target sharply to Rs 2,200 from Rs 1,500. This implies an upside of nearly 40% from current levels.The brokerage cited the impact of a potential Merchant Discount Rate (MDR) on UPI transactions from FY28 as a key factor behind its decision, although it warned that competitive intensity in merchant acquiring could increase further once the MDR kicks in. This could lead to realised economics being lower than published rates. Bernstein expects an MDR fee could lift Paytm’s net payments margins by 3-4 basis points, which could drive a 30% increase in the company’s earnings per share for FY30 compared to its previous forecasts.One97’s stock opened higher on Monday at Rs 1,445 and touched an intraday high of Rs 1,590. The stock had closed at Rs 1,441.60 on Friday. Other fintech players such as One Mobikwik Systems Ltd also surged 3%, followed by AvenuesAI Ltd, formerly known as Infibeam Avenues Ltd, which was up 2%.Paytm is the third-largest app in terms of the number of UPI transactions it handles. In June, it handled 1.8 billion UPI transactions worth a total of Rs 1.9 lakh crore. However, it was way behind top-ranked PhonePe (10.5 billion transactions) and second-placed Google Pay (7.4 billion transactions).Also Read | Why charge? Because smooth UPI payments cost Rs 20,000 crore a yearUPI transactions have not faced any MDR so far. But to help with the costs of running the payments infrastructure, the government has been subsidising UPI payments of up to Rs 2,000 made to only small merchants. However, this incentive is capped at 0.15% of the transaction value and is shared between banks, payment service providers and third-party app providers.The Centre paid out Rs 8,730 crore under the incentive scheme from 2021-22 to 2024-25. However, this was only 11% of the cost incurred by the payment industry.In April-June, One97 posted a profit of Rs 212 crore, noting that its Payment Processing Margin had “structurally improved” to over 4 bps due to higher growth in profitable MDR-bearing instruments such as credit cards on UPI and credit line on UPI (Postpaid), among other factors.Story continues below this ad“With relation to MDR on UPI, we only have one line to say – we want both MDR and non MDR paying merchants to benefit. Our life won’t change materially. Whatever will come will come in the bottom line and whatever will come will be good. So that’s it. There is no obligation in the business model,” Founder and CEO Vijay Shekhar Sharma had said in a post-earnings call.MDR and UPILast week, the Lok Sabha passed The Taxation and Other Laws (Amendment) Bill, 2026. The proposed changes to the Payment and Settlement Systems Act, 2007 could allow banks and payment system providers to charge fees on UPI and RuPay debit card payments — fees that would be levied on merchants, directly relevant to Paytm given payments make up the bulk of its revenue.Amid fears that the retailers may pass on the fee to consumers, the Ministry of Finance said on Saturday that consumers making UPI payments will not face any transaction charges and that any MDR fee levied on merchants will be “nominal”.MDR is a fee levied on merchants by banks to help meet costs related to processing of transactions, settlement and infrastructure. Credit cards face an MDR of 1-3% of transaction value while it is up to 0.9% for debit cards.