Zero MDR For RuPay, UPI Will Destroy Digital Payments Industry, Kill Jobs, Innovation: Private Players

Just yesterday we informed you about the government’s decision to not charge any MDR charges on transactions done via UPI and RuPay modes, in order to promote and achieve a ‘less-cash’ economy.

We depicted a clear picture of every aspect of the government’s moltive to imply this new rule, starting from January 1, 2020. Today, we would like to bring in the industry’s expectations and views on what they believe this new decision of the maiden-laiden Finance Ministry shall `lead to. We must inform you that the industry’s long term views and that of the government’s aren’t going hand in hand.

Govt Waives MDR on Rupay Cards & UPI

Before proceeding to our main discussion on what the industry believes this decision will lead to, we shall first paint a brief picture of the actual scenario going on so that people who aren’t aware of the government’s this new regulation, would find themselves in terms with it.

The Finance minister held a meeting with heads of different public sector banks recently on Saturday in New Delhi, where they discussed various issues concerning the finance and economic sector of the country. Post this meeting, the Finance Minister Nirmala Sitharaman announced the exemption of Merchant Discount Rate(MDR) charges on the transactions done via UPI and RuPay modes.

As per this regulation, companies with a turnover of Rs 50 crore or more will not be charged with any MDR on payments via RuPay Debit card and UPI codes, starting January 2020. MDR is the fees that a merchant pays to the bank, when a customer swipes a card on the merchant’s point-of-sale (PoS) terminal.

The government has rolled out this rule, in lines of achieving finance minister’s budget announcement in July. MDR is the fee that a merchant pays to the bank, when a customer swipes a card on the merchant’s point-of-sale (PoS) terminal. The government strongly aims to strengthen the digital payment system, thereby achieving a ‘less-cash’ economy.

Industry Believes the Strategy to be Unyielding

Now that you’re in par with the understanding of government’s decision to waiver off the MDR for companies using Rupay Cards and UPI methods, we can now lay what the industry feels about this move. MDR on Rupay and UPI will kill the industry and make the business model unviable. MDR on Rupay and UPI will kill the industry and make the business model unviable.

The Payments Council of India that is the representative body of merchant acquirers and aggregators that believes that this move by the government will kill the digital payments industry, criticising the government’s move.

The PCI declared that the decision is surprising and holds the potential to stop investment and innovation. It believes that zero MDR on Rupay and UPI will kill the industry and make the business model unviable. PCI strongly believes that if the government wants to drive digitization then it should be the one to bear the cost.

The industry says that this move shall dry out revenue, creating a catastrophic situation for the industry. If zero revenue is made from over 500 million active Rupay cards, service providers will start to withdraw PoS terminals to cut their losses.

Terming the decision to have right intention but a wrong policy, the PCI said that it will impact the whole digital payment industry as well as investments.