The Payments Council of India (PCI) Thursday said banks have not been reimbursing the merchant discount rate (MDR) for transactions up to Rs 2,000 to the merchant aggregators since January.
The Payments Council of India (PCI) Thursday said banks have not been reimbursing the merchant discount rate (MDR) for transactions up to Rs 2,000 to the merchant aggregators since January. In order to promote digital payments in the country, the government in December 2017 had said that MDRs would be reimbursed on transactions up to Rs 2,000 through debit cards, BHIM UPI or Aadhaar enabled payment methods. The PCI, which represents the non-banking merchant aggregators and acquirerers, however Thursday raised serious concerns over non-receipt of reimbursements of MDR by merchant aggregators, from the acquiring banks since January 2018.
There is ambiguity on the extent of MDR reimbursements that will be passed on to the aggregators and the industry fears that banks will only pass on the small proportion of the reimbursements to merchant aggregators and acquirers, while retaining the bulk of it with themselves. “This is likely to seriously impact the operating ability of merchant aggregators and dent the efforts to promote digital payments,” the PCI said in a statement. The MDR subsidies to be done by the Ministry of Electronics and Information Technology is believed to have been done to the banks, the PCI said, adding most of the banks have yet not reimbursed the due share to aggregators.
The PCI said the payment companies have been constantly following up with the banks as MDR is the major source of their entire business revenue and non-receipt of such reimbursements poses a serious impact on their businesses. As per MeitY citing RBI and NCPI transaction data for debit cards, UPI, BHIM and AEPS from January to June 2018, over 300 crore transactions were processed with value of more than Rs 4.50 lakh crore. “PCI members believe that post demonetisation role of merchant aggregators has been crucial in spreading digitisation of payments across the country. The entire payments industry supported the movement with full participation,” the statement said.
As per an estimation by the payment representative body, around 80 per cent volume and 60 per cent of the total value of transactions are done through debit cards are for a value of below Rs 2,000. This translates into a significant amount of business costs incurred on such transaction for which MDR reimbursement is due, the PCI said. Setting up of acceptance infrastructure as well as supporting small merchants in deeper pockets of the country involves high cost and low margins and absent timely reimbursements, the industry would be impacted in its efforts of promoting digital payments.
“The prevailing ambiguity over MDR reimbursements is leading the same industry which supported Digital India to tremendous pressure. As far as I am aware, none of the banks have reimbursed for debit card / UPI / AEPS transactions processed from January 1, 2018 till date,” said Vishwas Patel, Chairman of Payments Council of India. Patel further said that “major public sector banks like State Bank of India have announced that they will not reimburse for Off Us transactions of Debit Cards for transaction amounts below Rs 1,000, though MeitY has said that they will be reimbursing the bank upto 0.40 per cent of transaction amount to banks.”
This will kill micro transactions as it will make processing below Rs 1,000 totally unviable for non-banking merchant aggregators and acquirer members. “Overall, MDR reimbursement taking such a long time and fear of not getting sufficient share from banks is a major concern area right now for all our members.” The key stakeholders in a debit card transaction include the issuing banks, card networks, acquiring banks, merchant acquirers and payment service providers. MDR is the charge for facilitating a digital transaction and is to be split among all stakeholders. When any payment is made at a merchant Point of Sale (POS) through POS machine or QR ‘scan & pay’ or online mode of payment, MDR charge is payable by the merchant to his bank(acquirer), PCI said.