The implementation of a Merchant Discount Rate (MDR) for Unified Payments Interface (UPI) transactions is essential for smaller players to receive a fair share of the pie for the value they add to the payment ecosystem, according to a top executive at Amazon Pay, the digital payments arm of ecommerce major Amazon.
“We have been advocating for a fair value exchange between merchants and consumers or customers and banks and we are also advocating that some sort of MDR should exist (for UPI transactions). It already exists for credit cards on UPI or credit lines on UPI. But it should also come up for bank accounts so that everybody gets to have a little bit of share for the value they add in the ecosystem,” said Vikas Bansal, chief executive officer of Amazon Pay India, on Tuesday.
He was speaking on the sidelines of the launch of a new report 'How Urban India Pays' by Amazon Pay and global management consulting firm Kearney.
Bansal added that MDR must be fair and equitable to avoid hindering the adoption of digital payments.
The fintech industry has long demanded MDR for UPI transactions, arguing it is crucial for their long-term sustainability. During an open house session with Finance Minister Nirmala Sitharaman in March, various fintech companies discussed implementing MDR for these transactions.
MDR refers to the fee charged to a merchant for processing payments.
In August 2022, the Reserve Bank of India (RBI) released a discussion paper proposing a charge structure for UPI payments based on different transaction amounts. However, the finance ministry later clarified that there was no proposal to levy charges on UPI transactions, and the proposal has since been shelved.
Google Pay and PhonePe dominate 85% of the UPI payments market. Introducing MDR fees on these transactions may encourage other fintech firms to focus on acquiring new customers and break the duopoly.
The report, which surveyed over 6,000 consumers and 1,000 merchants, indicated that 65% of transactions in small towns in India are now digital, compared to 75% in larger cities. Millennials (aged between 25 and 43 years) and Gen X (aged between 44 and 59 years) are leading the adoption of all types of digital payment instruments, the report found.
Convenience, speed, and rewards are the primary factors driving the growth of digital payments in the country. Nearly 49% of respondents cited rewards as the main reason for their preference for online purchases and 34% for offline transactions.
“When we go to small cities and small towns, rewards are still a critical factor in trying digital payments. We, as an industry, have to channel some investment to drive that penetration where it is needed,” Bansal said.
Bansal added that Amazon Pay is focused on simplifying the customer journey and combating digital payment fraud by using more real-time variables.
However, he noted that concerns such as double debits, financial fraud, and internet connectivity issues could affect the growth of digital payments in the country.
“We have been advocating for a fair value exchange between merchants and consumers or customers and banks and we are also advocating that some sort of MDR should exist (for UPI transactions). It already exists for credit cards on UPI or credit lines on UPI. But it should also come up for bank accounts so that everybody gets to have a little bit of share for the value they add in the ecosystem,” said Vikas Bansal, chief executive officer of Amazon Pay India, on Tuesday.
He was speaking on the sidelines of the launch of a new report 'How Urban India Pays' by Amazon Pay and global management consulting firm Kearney.
Bansal added that MDR must be fair and equitable to avoid hindering the adoption of digital payments.
The fintech industry has long demanded MDR for UPI transactions, arguing it is crucial for their long-term sustainability. During an open house session with Finance Minister Nirmala Sitharaman in March, various fintech companies discussed implementing MDR for these transactions.
MDR refers to the fee charged to a merchant for processing payments.
In August 2022, the Reserve Bank of India (RBI) released a discussion paper proposing a charge structure for UPI payments based on different transaction amounts. However, the finance ministry later clarified that there was no proposal to levy charges on UPI transactions, and the proposal has since been shelved.
Google Pay and PhonePe dominate 85% of the UPI payments market. Introducing MDR fees on these transactions may encourage other fintech firms to focus on acquiring new customers and break the duopoly.
The report, which surveyed over 6,000 consumers and 1,000 merchants, indicated that 65% of transactions in small towns in India are now digital, compared to 75% in larger cities. Millennials (aged between 25 and 43 years) and Gen X (aged between 44 and 59 years) are leading the adoption of all types of digital payment instruments, the report found.
Convenience, speed, and rewards are the primary factors driving the growth of digital payments in the country. Nearly 49% of respondents cited rewards as the main reason for their preference for online purchases and 34% for offline transactions.
“When we go to small cities and small towns, rewards are still a critical factor in trying digital payments. We, as an industry, have to channel some investment to drive that penetration where it is needed,” Bansal said.
Bansal added that Amazon Pay is focused on simplifying the customer journey and combating digital payment fraud by using more real-time variables.
However, he noted that concerns such as double debits, financial fraud, and internet connectivity issues could affect the growth of digital payments in the country.
