The digital payment industry is likely to suffer a loss of about Rs 500-600 crore due to a move by the government. The government has withdrawn subsidy support on RuPay debit cards. In a cabinet note issued on Wednesday, the government said that it has allocated Rs 1500 crore for a subsidy on UPI payments for small merchants only in FY 2025. While the fintech industry expected the allocation to be around Rs 5,500 crore. Last year it was Rs 3,681 crore. here is why Digital Payment Industry faces ₹600 crore loss.
The digital payment industry is likely to suffer a loss of about Rs 500-600 crore due to this decision of the government. ET has given this information in its report, quoting sources. Actually, the government subsidizes digital payments to compensate for the revenue loss to banks. And also fintech companies due to the zero-merchant discount rate (MDR) on UPI and RuPay debit cards. MDR is a fee charged by banks to merchants to support digital payments. It was applicable before 2022.
Cards not being issued
Industry people say that without MDR or government subsidy, such transactions will become difficult. Many big banks have almost stopped issuing RuPay debit cards, as there is no revenue on these cards. Instead, they are showing more interest in giving MasterCard and Visa debit cards to their account holders. The share of RuPay debit cards in the total value of card payments processed every month has stabilized at less than 30%. According to RBI data, about 119 million debit card transactions were made for merchant payments in January 2024.
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The fintech industry has decided to convey its concern to the Finance Ministry in this whole matter. The industry is planning to write a letter to the Ministry of Finance regarding the huge cut in subsidy for digital payments through the Payments Council of India. Along with this, the industry has appealed to the government to bring back MDR or increase the allocated subsidy amount. The report quoted a senior official of a fintech firm as saying that the industry agrees to levy 0.25% MDR of the amount per transaction from the debit card, but the final decision will be taken by the industry representatives.
Banks have sent a proposal to the central government to bring back MDR on UPI payments for large merchants. This fee can be applied to merchants whose annual GST turnover is more than Rs 40 lakh. Before 2022, merchants had to pay a merchant discount rate fee for such transactions. Payment companies say that it is necessary to bring back MDR. Because the cost of compliance with the new rules has increased. The government subsidizes banks and fintechs to cover these costs, which is not enough. Experts say the reduction in subsidy for big merchants and RuPay debit cards is an indication that the government is taking the proposal seriously and may bring back MDR on these payments.
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