India FinTech Forum organised a Fintech Policy Roundtable to discuss Impact of zero MDR on the fintech ecosystem and steps required to continue the growth of digital payments” at Fintech Policy Roundtable on 29th January 2020 (Wednesday) in S P Jain School of Global Management.
The highlights of the discussion are:
- The panel welcomed the government’s move on directing business establishments with annual turnover of more than Rs. 50 crores to mandatorily offer low cost mode of payments. The panel also discussed and applauded government’s revolutionary initiatives like India Stack and UPI. However, the panelists and the audience unequivocally opined that Zero MDR directive would create uncertainty in the growth and investment prospects of payments industry.
- The panel discussed that Zero MDR mandate is likely to benefit bigger Fintech players with deep pockets, while hurting the growth of smaller players. The move may also prevent new players from entering the payments business.
- The mandate takes away incentives for private or Public Sector banks to further push circulation of RuPay cards and UPI, which may hurt the expansion of home-grown payments system
- The group unanimously opined that to support more digital transactions in the country, they are okay to operate at lower margins, but free is not the answer. And if it has to be Zero, govt. should look to compensate for the loss of revenue (the way MeiTY was compensating for < Rs. 2000 RuPay transactions)
- The group also observed that the verdict would cause approximately Rs. 1800-2000 crores loss of Revenue, which is not a big amount for the government to bear, but frequent policy changes like this would hurt the India story and may cause slowdown in Overseas investments coming into the system.
- Panelists felt that the move would not necessarily lead to sudden spike in digital transactions since 0.3-0.6% MDR was anyways not a big amount for the merchants.
- The panel also voiced that on one hand government is directing the likes of Flipkart and Amazon against the dumping of service, while on the other hand govt. is mandating dumping of payments service i.e. directing the payments industry to sell below market price.
- India has the lowest PoS density infrastructure. To correct this gap, the UoI should work with the RBI to put into place, An Acceptance Development Fund to further proliferate digital acceptance infrastructure. This fund could be managed by the IBA / NPCI / another entity that is representative of the Payment System Participants including banks and Non-banks.
The discussion points have been shared with RBI.
This article was authored by Upasna Batra Handa and Mandar Kagade.