E-payments industry counts the costs after zero MDR jolt

The year 2019 was an important one for the growth of digital payments in India. In October, Unified Payments Interface (UPI), the country’s instant payment system, clocked up over 1 billion transactions for the first time. Since then, it has done so every month.

Its growing popularity has benefited home-grown startups such as Paytm and PhonePe (now owned by Flipkart) and global players like Google Pay. But this momentum now faces a hurdle that industry representatives fear could seriously hurt the sector.

The central government has made the merchant discount rate (MDR), a form of fee collected by banks, on UPI and RuRpay debit card transactions zero. The rule came into effect on January 1. This will rob banks, payment services providers and other stakeholders propping up the digital payments ecosystem of crucial revenue.