Budget Proposal Not To Charge MDR Will Hurt Industry, Says Payments Council

The payments industry has raised concerns over the Budget proposal to levy zero MDR on all merchants and has said it will lead to the collapse of the payments acquiring industry.

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 eco-system. 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 non-bank players do not have any other avenue than the MDR.”

Finance Minister Nirmala Sitharaman in the Union Budget 2019-20 proposed that no charges or Merchant Discount Rate (MDR) will be imposed on customers as well as merchants. “RBI and banks will absorb these costs from the savings that will accrue to them on account of handling less cash,” she had said as part of a slew of measures to further encourage digital payments.

In a statement on Tuesday, PCI said the announcement will 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 focus and invest in the expansion of the acquiring infrastructure, it added.

Deepak Chandnani, CEO, South Asia and ME, Worldline, said, “With the banks being asked to bear the burden of Zero MDR, their acquiring business profitability will be impacted. Further, it is likely that banks would, in turn, try to recover some of this from their non-bank fintech partners, thus negatively impacting all eco-system players, who are key to driving much needed growth of the acceptance and acquiring eco-system.”