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Zero MDR on merchants will lead to collapse of payments acquiring industry, says PCI

payments, digital payments

The Payments Council of India has raised concerns over the budget proposal to levy zero MDR (merchant discount rate) on merchants, saying it will eventually lead to the collapse of the payments acquiring industry. In her maiden budget speech last week, Finance Minister Nirmala Sitharaman had said that all businesses with an annual turnover of more than ₹50 crore will have to offer digital payment modes, and that such merchants will not be charged MDR, which is typically around 1.5-2%. She said that the RBI and banks would bear this cost "from the savings that will accrue to them on account of handling less cash”. Prior to the budget announcement, the government was subsidising MDR on low-value digital transactions, that is, ₹2,000 or under. In a statement (see below) on July 9, PCI said that the announcement would "deflate the hard work done by the acquiring industry, and MDR, if not charged to the customers and merchants, should be borne by the government. This will help the acquirers invest in the expansion of the acquiring infrastructure". Terming it a "knee-jerk" policy change, PCI said it was also likely to spook foreign investors, who are "already managing some existing policies with great difficulty". Loney Antony, co-Chairman, Payments Council of India, and Vice-Chairman, Hitachi Payments said, “Non-bank payment service providers (PSPs) like aggregators/processors are a significant part of the ecosystem. If there is no commercial model, they will be forced to shut down. Banks may have multiple ways to recover money from the merchants, but…

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