Lower MDR cap likely to hit e-payments business: Payments Council

OUR BUREAU: The latest changes proposed by the Reserve Bank of India on digital payments will make the payments business unviable and kill innovation, said Payments Council of India (PCI), the industry body of digital payment companies in the country.

“We have sent in our responses highlighting the fact that RBI should not reduce the cap on MDR for debit cards any further, and leave it open for market participants to decide the rate,“ said Deepak Bhutra, chief executive officer of digital wallet company Ongo and a member of PCI.

In a typical digital transaction, there are four entities, one being the issuer bank, which has issued the card, the acquiring bank which has acquired the merchant, the payment network companies such as Visa, MasterCard, and finally, the service provider like Billdesk.

The charges levied on digital payments, referred to as MDR in industry parlance, is to be borne by the merchant and shared by all the four players, which currently is around 1% of the amount being paid. RBI in its latest guidelines suggested reducing the charges.It has suggested a lesser MDR for merchants with an annual turnover of less than Rs 20 lakh per annum, special category merchants such as hospitals, toll booths and government entities.

The Council has also suggested equal sharing of charges between the acquiring bank and the issuing bank which currently is skewed towards the issuing bank. “I think the RBI should bring in a 5050 split between the two banks usually involved in the process and also ensure that there is sufficient compensation for the players like us who are installing payment terminals, and managing transactions as well,“ said MN Srinivasu, a member of PCI.