MUMBAI: Top payment facilitators have sought a compensation mechanism through a bankfunded model for revenue losses due to New Delhi’s zero-merchant discount rate (MDR) policy, which took effect in the New Year.
These companies have urged the Centre to nudge banks to compensate “a minimum of 0.25% of the transaction amount for all the UPI and RuPay, Person to Merchant (P2M) transactions” for sustained service and ecosystem expansion in the absence of any clear revenue model.
“With the wide usage of UPI and with more than 500 million RuPay debit cards in the market, it will be very difficult for our members to continue processing these payment options for free,” the Payment Council of India (PCI) said in a letter to Finance Minister Nirmala Sitharaman.
PCI represents more than 30 payment companies, including Paytm, PhonePe and Amazon Pay.
“Hence, we would request you to kindly take this up with the banks and help us with a framework or process for minimum compensation which will be provided to the Payment Service Providers (PSPs),” said the letter dated January 15.
The letter is also addressed to the department of economic affairs additional secretary, K Rajaraman. ET has seen a copy of the letter.
This comes less than a week after Sitharaman told a representation of top payment executives, including Paytm’s Vijay Shekhar Sharma and PhonePe’s Sameer Nigam, that any direct capital support to the sector would unlikely be considered in the Budget.
Earlier, ET had reported that the country’s nodal payments regulatory body National Payments Corporation of India (NPCI) had sought an estimated Rs 2,000 crore as compensation for the payments industry.
However, in a private meeting with payments industry CEOs on January 10, Sitharaman had expressed the possibility of the government devising an alternative relief mechanism for the sector, which would involve mandating banks to continue their investments for digital payments growth despite the lack of direct fee-based returns for these lenders, sources told ET.
Sitharaman said in her budget speech in July that banks and the Reserve Bank of India would be asked to invest the “same amount they save on handling less cash due to the growth of digital payments back into the expansion of the payment ecosystem” once the zero MDR regime kicks in.
PCI, however, in the letter pointed out that “none of the banks” has yet shown any intent to compensate the payment companies.
Source: Economic Times