Mandate zero charges on digital transactions for merchants: A disappointment among the digital payments companies.

The government’s move to mandate zero charges on digital transactions for merchants has caused disappointment among the digital payments companies and could also affect onboarding of new merchants, said a note shared with the press by the Payments Council of India, the industry body for such companies.

The council has also recommended that if the government intends to offer digital payments free of cost, it should create a means for bearing the cost of MDR, thereby ensuring that the payments business remains viable.

Top payment industry executives said that the move could impact the banks’ revenues from their merchant acquiring business and they could pass on some of the charges from fintech players who help banks process such transactions.

“It is likely that banks would in turn try to recover some of this from their non-bank fintech partners, thus negatively impacting all ecosystem players, which are key to driving much needed growth of the acceptance/acquiring ecosystem,” said Deepak Chandnani, CEO, South Asia & Middle East, Worldline, which deploys point of sales terminals for banks.

One of the major industry segments that could get affected by the move is companies which help banks process card transactions and manage the merchant relationships. Loney Antony, vicechairman at Hitachi Payments, said that this could lead to job loses as companies who act as intermediaries in the digital payments space will shut down due to drying up of revenues.

“Digital payments grew from 6% of Gross domestic product to 14% and now slipped to 12%. Cash is also 12% of GDP. We have not made any progress on this front and if this trend continues, we will go back to single-digit very soon,” he said.

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