Payments problem

Removal of MDR will affect innovation in fintech

The National Payments Corporation of India (NPCI) last week revised bank interchange fees for the Unified Payments Interface (UPI) to zero for all domestic transactions with retrospective effect from January 1, 2020. This is a “pilot” programme, which will stay in effect till April 30, 2020. This cut is the inevitable consequence of the finance ministry’s decision to cut the merchant discount rate (MDR) to zero on the UPI and RuPay transactions from January 1. Banks cannot pay interchange fees on these transactions, since they are no longer receiving fees from the MDR. The decision assumed that the removal of