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TRAI Chairman: A telecom-like interconnection charge for payments?

At the IAMAI India Digital Summit yesterday, the TRAI Chairman RS Sharma mooted the idea of the payments industry adopting something similar to an interconnection charge in payments. "My belief is that MDR is coming from the card world", he said. "Digital Transactions will not become sustainable unless you address the three C's of cost, convenience, and confidence. When I transfer cash, it doesn't have any cost. But If I do a digital transaction, I pay someone. If I'm paying with a card, then the work at the backend is zero. We have a work done principle for how much the telecom operator A pays to operator B, as termination charges. This is computed in terms of work done." The interconnection charges regime in payments allows for interoperability between telecom operators, but also benefits the larger operators, because the operator whose customer is receiving the call would be paying the operator whose customer is making the call. If you think about it, in terms of incentives, this essentially encourages a telecom operators to push customers to make more calls. Extrapolate it to a payments scenario, and such a regime would push payments companies to try and get their customers to make more payments than acquire, and thus could help drive costs down. That's a interesting suggestion from the TRAI Chairman, though there are people calling for MDR to be made zero. Also read: Anand Raman on other models in "Cash needs to lose this battle". Other excerpts from RS Sharma's session at the…

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Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

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