Page 33 - Banking Finance September 2020

ARTICLE

in our country where people always thought that Cash is the X RTGS, among others.
King. Cash and paper instruments have been the
conventional mode of payment. The move is expected to boost payments via home-grown
real-time payments system Unified Payments interface (UPI)
But these days Cash is second option. The customer chooses at merchant locations, along with RuPay debit cards.
first Digital mode to pay whether it is payment for movie
ticket or hotel charges. More Indians from smaller towns Presently, it is applicable for online transactions and QR-
and cities are paying digitally for goods and services, raising based transactions.
expectations of sustained growth for non-cash payments,
even as Reserve Bank data indicates the sharp spike in digital The amount that the merchant pays for every transaction
transactions following the 2016 note ban has evened out gets distributed among three stakeholders--the bank that
following year enables the transaction, vendor that installs the point of sale
(PoS) machine and the card network provider such as Visa,
Payments company executives estimate that card MasterCard, RuPay.
transactions in towns with populations of up to 1 million have
doubled in the three years since demonetization.

RBI had decided to slash merchant discount rate (MDR)
charges on payments made through debit cards and do away
with levies on small transactions through mobile phones and
Internet from 1 January to 31 March 2017 to encourage
digital transactions.

Following the demonetization drive, MDR was further
reduced for transactions up to Rs 1000, to 0.25 per cent of
the transaction value. For transactions above Rs 1000 but
less than Rs 2000, MDR was kept at 0.5 per cent of the
transaction value.
(Image source:- https://economictimes.indiatimes.com/)
Recent Development in merchant
There are some other point of view
discount rate (MDR)
regarding the latest development:-
The Government has decided that From 1st January, 2020,
Vishwas Patel, the Payments Council of India Chairman, said,
businesses with an annual turnover of more than 50 crore
"The zero MDR on RuPay and UPI will kill the industry and
will have to offer low cost digital payment options to
customers and Merchant Discount Rate (MDR) will not be make the business model unviable. It's like nationalization
levied on either customers or merchants. of the payments industry. If the government wants to drive
digitization, then it should bear the cost."

Low cost digital payment modes If the government wants to push digital payments, then
Low cost digital payment modes will include following digital making MDR zero is not the solution, but a lower, controlled
apps/ platform MDR along with added tax benefits to merchants will go a
X BHIM UPI, long way.

X UPI QR Code,
References:-
X Aadhaar Pay,
https://economictimes.indiatimes.com/
X Debit Cards, https://www.livemint.com/
X NEFT, https://www.rbi.org.in T

BANKING FINANCE | SEPTEMBER | 2020 | 33