Online payment service providers have welcomed the recent decision of Union Cabinet to waive off surcharge, service charge and convenience fee for payments made through the digital mode.
The government’s decision was taken to promote payments through cards and digital means to change the cash dominated payment ecosystem to a cashless one.
The biggest roadblock for merchants is the service charge structure imposed by the government and organisations that deter acceptance of digital payments from customers. Removal of service charge and rationalisation of merchant discount rate charged by banks is expected to lead to greater adoption of digital payments among merchants transacting online and offline.
The measures are expected to push acceptance of digital payments due to cheaper transactions cost and shorter settlement time. Once acceptance booms, usage and scale will lead payment companies to swarm the country, according to Kiran Murthi, CEO of AskMeBazaar.com.
“Going digital will not only save the country crores of rupees, it will also provide consumers and merchants a more secure and friction-less way of transacting,” said Govind Rajan, chief operating officer of FreeCharge.
In August 2015, the Reserve Bank of India had given an in-principle approval to 11 companies to set up payment banks for financial inclusion. Payment banks will allow consumers to transact via digital banking products and leverage the benefits of a formal banking system.
“Measures such as allowing only electronic payment for transactions above a certain value, payment for all government services online would enable multiple cash-based transactions to move online. This is an important intervention for India to move towards a less-cash and eventually to a cash-less society. The government seems to be receptive of the suggestions made by the industry. We will wait to get more details on this,” said Shailaz Nag, co-founder of PayU India.
Vivek Chandok, head of consumer business at Tech Mahindra which recently launched its digital payment services MoboMoney, said, “The move by the government has created a positive momentum as some portion of burden on merchants will be seen going away. However, two main deterrents — MDR charge and infrastructural challenges — will continue to hamper the acceptance of digital payments in India.”