In a move to address the impact of zero charges on online payments processed by payments service providers (PSPs), the Payment Council of India (PCI) has reportedly sought compensation from the government for the losses incurred in processing the digital payments.
The PCI is an established industrial body that serves as a representative for over 100 non-banking PSPs in the country.
The PCI addressed the Ministry of Electronics and Information Technology, Reserve Bank of India, and the Ministry of Finance in a letter requesting for the introduction of a dedicated fund whose sole purpose would be to redress losses incurred while processing digital payments.
The losses are solely driven by the full waiver of merchant fee which was mandated by the government.
At present, the Merchant Discount Rate (MDR) which is borne by the merchants is to be paid to service providers and banking institutions for online transactions. Over the last few years, PSPs have been deliberately working towards the promotion of online transactions in the country.
With the MDR being waived off in the Union Budget 2019, PSPs would bear the losses with their main source of revenue blocked.
According to sources, the induction of zero merchant fee has resulted in the division of the industry into two groups. While one group approves of the government’s decision to waive off merchant charges, the other has been attempting to escalate the same by seeking compensation.
The PCI believes that a minimum processing charge on online payments will allow non-banking companies to sustain their business. The letter mentioned that it would be very difficult for PSPs to survive in the industry unless they are provided with a margin of 25 basis points (bps).