Mobile wallet and payments app Paytm will pass on the Merchant Discount Rate (MDR) that banks and card companies charge for digital transactions to consumers starting 1 July, according to an Economic Times report. The move will help Paytm reduce its burn rate and turn profitable.
According to the report, the MDR charge amounts to 1% on payments through credit cards, 0.9% for debit cards and up to Rs 12-15 for transactions by net banking and the Unified Payments Interface (UPI). Till now, Paytm was absorbing this charge and hasn’t levied anything extra for payments made through its platform in order to build a customer base.
The new levies will be applicable for all modes of digital payments to top up the wallet, paying utility bills, buying online tickets, phone recharges etc.
Paytm told Economic Times that it was not levying any convenience fees and just passing on the MDR that banks and card companies charge. “In case there is any fee being charged, then it is in fact the MDR being passed on by the merchant to the customer,” a spokesperson said. “Paytm does not (itself) charge any convenience fee or MDR from the consumers and has no plans to levy the same in the future.”
“There will be a certain loss of customers, which I am sure that Paytm expects,” Sanchit Gogia, chief analyst at Greyhound Research, told Economic Times. “But ...it is short-term loss for the long-term gain.”
According to experts, Paytm’s decision could have a marginal impact on the overall digital payment business in India that has expanded 10 times since the NDA government assumed charge in 2014.
Last year, the government also announced that it would bear MDR charges on transactions up to Rs 2,000 made through debit cards, BHIM (Bharat Interface for Money), UPI or Aadhaar-enabled payment systems in order to promote digital transactions.
Paytm, however, clarified that it does not levy any convenience/ transaction fee from customers on using cards, UPI, net-banking, and wallet. Customers will continue using all the services available on the platform without any fee (same as before), it added.
The online payment app also said that a few merchants like educational institutions expect customers to pay for credit card charges, in which case debit cards and UPI are encouraged to be used. Paytm concluded by saying that it does plan to levy any convenience fee in the future as well.