Proposed debit card rate not lucrative, says PCI

PCI adds, further reduction in MDR will discourage future investments, affecting e-payments industry

The rate structure proposed by Reserve Bank of India (RBI) on using debit cards for electronic payments is not remunerative. Further reduction in merchant discount rate (MDR) will discourage future investments and adversely affect growth of digital payments industry, according to Payments Council of India (PCI). MDR is the rate charged to a merchant for using digital-transaction services.   

RBI has proposed that small merchants may not pay more than 0.4 per cent of the transaction value for physical PoS (point of sale) and 0.3 per cent towards digital PoS. 

All other categories of merchants (apart from government) may not pay more than 0.95 and 0.85 per cent of transaction value for physical and digital PoS, respectively. Currently, MDR charges on debit card transactions stand at below 0.75 per cent for transactions less than Rs 2,000 and under one per cent for those above Rs 2,000.

PCI said the proceeds from MDR were tilted towards card-issuing banks and did not leave any margins for acquirers and payment processors. The group hopes RBI will ensure equitable distribution of proceeds from MDR among all players in the ecosystem, PCI added.

The acquirers have been investing in giving small merchants access to digital payments. These non-banking payment entities take the responsibility of not only providing the infrastructure but also managing merchant's evaluation, servicing, risk management, and education, and MDR is the only source of revenue for these payment companies.