MDR waiver to boost UPI payments, may hit earnings of banks, PoS providers

The waiver of merchant discount rate (MDR), a charge borne by merchants on digital payments, has left the industry divided.

Experts and industry participants Business Standard spoke to are of the opinion that the move incentivises a pocket of customers (only person-to-merchant transactions) and large retailers to use UPI-linked payment modes while it cripples banks and payment intermediaries like point-of-sale (PoS) providers whose earnings will see a dip.

In the Union Budget, the government announced that no MDR will be charged on businesses with a turnover of over Rs 50 crore or their customers. Those in this bracket will not be charged any fee on accepting payments through digital means like “BHIM UPI, UPI-QR Code, Aadhaar Pay, certain debit cards, NEFT, RTGS”. The charge will be borne by the banks and the Reserve Bank of India (RBI).