Removal of merchant discount rate (MDR) brings opportunity for OMC
By MYBRANDBOOK
India’s acceptance of digital payment modes will accelerate with this kind of change on more payments options. With the intention of making zero fees to merchants will lead to more acceptance of digital payments. Oil marketing companies will save ₹400-500 crore annually every year with the proposed removal of merchant discount rate (MDR)
MDR is a card transaction fee paid by the merchant—in this case, the fuel company—and shared by banks which put up the swipe machine and issue the card, and payment networks like Visa and Mastercard and the MDR is not passed on to customers. MDR is a charge levied for facilitating a digital transaction and is generally distributed among various parties. Currently, merchants bear the cost of MDR that is around Rs 12-15 per transaction.
Merchant Discount Rate (MDR) subsidy, that was issued by govt last year in December, to waive off all transactions fee from digital transaction upto Rs 2000 and reimburse banks, is still due. The scheme has started in January 2018 and no payment has been made to payment aggregators .Those firms were having 20 basis points (on an average) for each transaction through debit cards until December 31, 2017. Later, RBI capped the MDR to 0.4 per cent of the transaction value for transactions up to Rs 2000.
The govt has to pay the above mentioned per cent to banks instead of merchants. Here, banks will be responsible to pay all parties. To promote digital transaction via low-cost digital payments modes such as BHIM UPI, UPI-QR Code, Aadhaar Pay, Debit cards, NEFT, RTGS, the government has proposed to abolish all charges levied on merchants or customers who perform transactions through these modes.
The present Union Budget 2019, FM Nirmala Sitharaman has announced, that there should be no charge on merchant discount rate (MDR) for companies with more than Rs 50 crore turnover accepting payments through digital means.
As of now, the government doesn’t levy charges on transaction up to Rs 2,000 via debit cards, BHIM and other UPI-enabled payments apps. Whereas, the banks and payment firms have keen on having this issue sorted out.The move faced criticism from payment firms, who think this will lead to more job losses.
The decision might affect digital payments growth in the long run and it will hurt payment firms including banks and merchant onboard on them, banks said.
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