Story of MDR ( Merchant Discount Rate)

Let’s suppose you buy a box of chocolates for ₹100. You don’t have cash on you. So you decide to pay using your SBI debit card. This sets off an elaborate tango that involves multiple stakeholders.
The moment you swipe your card, the store owner’s bank will receive the transaction information associated with your purchase. Bank will now have to verify with SBI if you’ve got enough money to pay for the purchase. And they’ll also have to see if all your information checks out
However, they can’t do it on their own. Instead, they’ll have to rely on a payment network operated by Visa, Mastercard or RuPay. Once these guys enter the fray, they’ll relay the information to SBI and after everything checks out,
the money will finally be credited to the store owner’s account. That is after everyone has taken their cut. Your bank will take a small piece of the pie. The merchant’s bank will take its cut and the likes of Visa and Mastercard will take their share.
And the store owner will only receive what’s left. In essence, if the MDR stood at 1%, he will receive ₹99 from your purchase.
But here’s the problem. For a government that is trying to push the digital payments initiative, this is a bottleneck. Remember, if the merchant is facilitating a digital transaction, he loses the ₹1 and he will be more inclined to simply accept payment in cash.
So in a bid to encourage people to adopt digital payments the Finance Ministry simply decided to waive MDR on all transactions made through UPI and RuPay debit cards in 2019.
And while you could argue that this did, in fact, promote digital payments, it also did something else. Remember, the banks still have to process digital transactions. They still have to do the tango. The only difference — They have to bear the cost themselves.
So they did the only thing they could. They lobbied. Indian Banks’ Association (IBA) sought compensation to the tune of ₹2000 crore a year, to run the RuPay/UPI infrastructure. They wanted to make up for the lost revenue through MDR. Finance ministry however politely declined.
Their contention was simple.

They believed the promotion of digital transactions would allow banks to save money elsewhere. For instance, the ministry estimated that banks could save up to ₹21,000 crores from not having to handle and process cash.
They asserted that this money could easily help banks operate the digital ecosystem supporting UPI. But soon enough, cracks began to appear.
The banks lobbied once again. This time they wanted a waiver. A waiver of the PSP fee. Now bear in mind we haven’t yet discussed third party app providers. These are intermediaries in the digital ecosystem that also help facilitate UPI and RuPay transactions.
Think Google Pay. And while most of them are loss-making as it stands, they did levy a small charge on banks (called the PSP fee) for helping them process digital transactions. But since banks were already cracking under the pressure, they wanted the PSP fee waived off as well.
And once that happened, more players in the digital ecosystem had to suffer.
Meanwhile, banks were also becoming increasingly reluctant to issue new RuPay cards. After all, processing a RuPay card transaction had no upside.
They simply had no incentive. So they went slow and pushed it on the backburner. Customers also reported frequent failures with these indigenous cards and the banks now contest that this problem will likely persist unless MDR charges are reinstated.
And that’s why the IBA and payment forums recently approached the government to reverse its stand on MDR.

So we will just have to wait and see what happens.

And if you have a RuPay card like me you will continue to suffer.s
Source : Finshots

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Kamran🗣️ Namma Uru Bengaluru, Namma Nadu Karunadu

Kamran🗣️ Namma Uru Bengaluru, Namma Nadu Karunadu Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @CitizenKamran

12 Jan
Some more Committee proposals
Best is towards the end.
Read 11 tweets
6 Dec 20
A simple way to understand why the Farm Bill was passed is to go through this thread.

Important Number first :-

India's annual GDP from farming sector is around 20,000 crore.
Remember we are still a agricultural economy and not an industrial economy like China.

This farming sector is mostly run and organised by farmers and government.

Now the corporates want a share of this.
Because there is a lot of money and profit to make.

But it's not easy.
There are some problems and many protection for farmers put in place over many years
The biggest problem is that different States have different laws for farmers.

To prevent the farmers from being exploited government has put in place MSP (Minimum Support Price) where support is the keyword. Remember it's not for profit it's support.
Read 12 tweets
5 Dec 20
Understanding #GHMC elections.
Party -2016- 2020
TRS - 99 - 55 - 44 seats less
BJP - 4 - 48 - 44 seats more
AIMIM-44-44 - same number of seats
TDP - 1 - 0
Others 2 - 2
In terms of vote share
Assembly elections -->GHMC
TRS 34.3% --> 43.85%
AIMIM 16.9% --> 15.85%
Congress 15.1% --> 10.40%
TDP 20.9% --> 13.11%
BJP 12.8% --> 10.34%,
1. Voter share of AIMIM has gone down by a less percentage but it's seats remain same. So we can say that it's vote bank is undented

2.TRS vote share increased but it's seats decreased. So overall we can say that popularity of KCR has increased but it's spread thinly
Read 7 tweets
4 Dec 20
Read to understand how Godi media works

No official figures declared so far, Telugu news channels are giving both the ruling Telangana Rashtra Samithi (TRS) and the Bharatiya Janata Party (BJP) the lead.

At 1.30 pm, ETV reported the BJP was leading in 24 seats, while the TRS is up in 18 seats. It said Asaduddin Owaisi’s All India Majlis-e-Ittehadul Muslimeen (AIMIM) was leading in 10 seats and the Congress in three.

NTV, on the other hand, said TRS was ahead in 57 seats, AIMIM in 30, the BJP in 25 and Congress in two. TV9, meanwhile, said TRS was leading in 59 seats, AIMIM in 27, the BJP in 26 and Congress in two.

Read 4 tweets
3 Dec 20
Agriculture is one of the important sectors not just in India but in the whole world. This is especially true in an agrarian country like India where farmers are considered to be equal to God.
Rightly so, because without farmers there would be no food to feed our growing population in the country. Almost every one of us would starve to death if the farming community stops their work. Undoubtedly, the farmer in India is the real backbone of our country.
Without him, the economy would literally come to a standstill. The skyscrapers, shopping malls, fancy cars and other luxuries that people in the urban regions enjoy today only because a farmer in rural India is getting his hands dirty and working day in and day out in the fields.
Read 26 tweets
2 Dec 20

BJP Govt has printed new a law-draft --- minimum fare on many many of the special train will be 500 km at least !!!

Even if person has to get down just 50 km away.

For example to go from Bangalore to Mandya or Mysore you will have to pay 500

Details in thread.
Regular trains in the country are closed due to corona pandemic. Indian Railways is running some special trains for the convenience of passengers. But now the railway is going to make the services of these trains too expensive.
From now on it can be expensive to travel in these trains. Special charge is being taken from those traveling in these trains and now the kilometer restriction charge is also being recovered.
Read 8 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!