Latest report reveals the Reserve Bank of India’s (RBI) decision to float a discussion paper on payment transaction charges has stunned the digital payments industry.
Thinning Of Margins In India’s Payments Ecosystem
In fact, it has been pushing for a restoration of the merchant discount rate (MDR) on Unified Payments Interface (UPI) and RuPay cards.
It seems that the stock markets and most industry executives took the central bank’s Wednesday announcement on a discussion paper.
This will mean a further thinning of margins in India’s payments ecosystem.
Move Affected Share Market
The move has already affected Paytm owner One97 Communications as its share prices dropped immediately after the announcement.
Payment industry executives also admitted that they are surprised by the move to review charges.
Some say that it is a revisiting of the government’s December 2019 move to exempt RuPay and UPI transactions from MDR.
Payments On Transactions
A senior industry executive explained, “I feel it’s really the government speaking here because there is an influential set of large merchants who want free transactions. The industry has been okay with fee exemptions for GST-registered merchants with turnover of under Rs 2 lakh. If we don’t get even that, maybe it’s time customers start paying for their transactions,”.
At the same time, some others think that the discussion paper may be an initial step towards restoring MDR on UPI and RuPay and a more remunerative pricing regime.
“We believe the discussion paper on charges could be a step towards bringing back MDR on UPI and RuPay. As the RBI has raised ATM transaction fees from Rs 15 to Rs 17 and even Rs 21 after five free transactions, we do not see them directionally going for lower charges,” said Anand Kumar Bajaj, founder, MD & CEO, PayNearby.
According to the most of the sector analysts, the payments business in India is quite unremunerative in and of itself and lending offers the only means of making money.
Most payment models across the world are profitable, with merchants willing to bear transaction costs, the Indian example is different, said Kotak Institutional Equities in a report dated December 1.
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