Startup Policy Forum Backs 'Gamechanger' Discount Rate On UPI For Large Merchants
The Startup Policy Forum has endorsed the industry proposal to introduce merchant discount rate on Unified Payments Interface transactions for large merchants, calling it a transformative move that will drive digital payments adoption, enhance innovation, and ensure the sustainable growth of the payments ecosystem, as per a press release.
SPF emphasised that the reform would empower the next 500 million Indians to participate in India's globally recognised digital payments revolution. It also highlighted the two-tiered MDR model, which would exempt small merchants from the charge while applying it to larger businesses.
"This distinction will also ensure the long-tail of small value merchants have adequate impetus to upramp and experience digital payments acceptance ensuring UPI witnesses the next wave of growth," SPF said.
Beyond promoting financial inclusion, SPF argued that the policy would mitigate fraud, foster competition, and create a balanced ecosystem where smaller players can thrive.
The forum also stressed the need for a more evenly distributed market structure, ensuring that digital payment services are not dominated by a few major players.
SPF expressed its intent to work closely with key stakeholders, including the Reserve Bank of India, the Ministry of Finance, NPCI, and the Prime Minister's Office.
The Payments Council of India had written to the Prime Minister's Office on Monday, seeking an imposition of merchant discount rate on Unified Payments Interface and RuPay debit-card transactions.
The industry body, which represents 180 non-banking payment industry players like Google Pay, PhonePe, and Paytm, had claimed that there were "pressing financial sustainability concerns" facing the digital payments ecosystem due to the continued zero MDR policy, which has been in effect since January 2020.
Existing MDR structures for other digital payment instruments like credit cards is at approximately 2% and non-RuPay debit cards are at about 0.9%.
The PCI also told the government that introduction of nominal MDR would not result in "any operational disruption, even in the short term, as these merchants were already accustomed to MDR on other payment modes".
The MDR imposition will not affect about 90% of the six crore merchants that accept digital payments, since they are categorised as small merchants. Only about 50 lakh merchants categorized as large enterprises will be impacted, according to the PCI.
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