Post the Finance Minister, Nirmala Sitharaman’s policy of zero MDR on RuPay and UPI has come to light, the FinTech Industry has been voicing their concerns on how this decision would bring their business model unviable and most importantly, would drastically affect the industry.
Expressed in terms of percentage on transaction amount, MDR or Merchant Discount Rate is the cost paid by a merchant to the service provider for accepting digital payments from their customers.
PCI Chairman, Vishwas Patel spoke out on how this decision would bring a significant negative impact on the payment ecosystem –innovation, job losses and will slowdown the expansion of the digital payments in India.
He adds, that zero MDR will wipe out revenues as banks will not pay for their service, additionally if there’s zero revenue from additional 500 million RuPay Debit Cards, the service providers will start withdrawing existing deployed POS terminals from smaller shops and establishments.
The Payments Council of India enumerates the loopholes of the decision by mentioning how zero MDR will impact the investments coming to the industry. It says that Debit Card infrastructure requires POS, switch & continuous operations to mitigate frauds and it would become extremely difficult to manage, with the implementation of this decision.
Previously, PCI had held multiple meetings with the Ministry of Finance enumerating the drastic affects of zero MDR for the FinTech ecosystem.
Where the industry welcomed the policy of zero MDR on transactions below INR 2000, the elimination of MDR on UPI and RuPay transactions has stirred a controversy amongst them.
Moreover, a mandate for providing payment facilities to the customers through UPI and RuPay Cards have been generated for business establishments with turnover of INR 50 Crore or more.