RuPay Cards Facing Discrimination By Banks, Reveals IIT-Bombay Study

After revoking merchant charges on digital payments, Rupay debit cards seem to have lost the popularity as banks are choosing Visa and MasterCard for not charging any restriction fees. 

An IIT-Bombay study authored by Professor Ashish Das has revealed that India’s card payment RuPay is facing differential treatment in the pricing structure.

According to a report in ET, the banks choose to issue Visa and MasterCard more than RuPay cards because they lose money on transactions.

The study has found less RuPay debit cards being issued by banks from September 2019 to August 2020.

The study also revealed that only 65 lakh debit cards were issued in August 2020, compared to 4.6 Cr cards in the corresponding period of 2019.

The report further highlighted that RuPay card issuance has been down as compared to debit cards post September 2019. “This reflects an implicit increase in y-o-y growth of MasterCard/Visa debit cards. We call this the whiplash of the zero MDR policy,” Das added.

On MDR pricing, the study suggested a cap of 0.6% for all ecommerce payments and for card payments, merchants with an annual turnover of above INR 2 Cr should also pay an MDR of 0.6%.  

On the other hand, for smaller merchants, an MDR of 0.25% for transactions up to INR 2,000 should be implemented, and it should be 0.6% again for transactions above INR 2,000. The overall ceiling of all MDR could be set at INR 150.

The government had announced that banks or other payment system providers are not going to impose charges or merchant discount rates (MDR) on either merchants or customers. However, the government has clarified that the updated provision applies only on digital payments made to establishments with a turnover of more than INR 50 Cr. 

MDR, usually 1% to 3% of the overall transaction, is the rate charged to a merchant for payment processing services on debit and credit card transactions. Reportedly, now the Reserve Bank of India (RBI) or banks are expected to bear these processing charges. 

Digital Payments Growth In India

Recently, RBI data showed that RuPay reported 1 Bn transactions through both online and offline merchant payment modes in the financial year 2019, a nearly 70% jump compared to 667Mn transactions in financial year 2018.

According to a report by management consulting firm RedSeer, digital transactions on the UPI network are expected to touch 1.78 Bn this month and continue their climb from there. 

The report mentioned that as the economy rebounds after the Covid-19 lockdown, there would be a consequent growth in digital payments, which are expected to grow 2x and touch $60 Tn by 2022, “driven by a continued rise in private expenditure, with retail consumption at the forefront, and a significant increase in digital maturity of the Indian customers.”

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