00:00UPI payments are changing starting October 15th. UPI payments will not be entirely free in just a month's time.
00:08But who will pay the new MDR fee of 0.4% and who will benefit from it?
00:15Well, MDR stands for Merchant Discount Rate and this is a fee that is paid by merchants to payment processors
00:22and to banks.
00:23Starting October 15th, both mid and large size merchants will have to pay MDR fee of 0.4% on
00:31UPI transactions above Rs. 2,000.
00:34And this has been done up to Rs. 75,000 of transactions that 0.4% will be applicable.
00:43Above this, the MDR fee will be capped at Rs. 300 as well.
00:49But remember, consumers are not liable to pay this charge at all.
00:54This fee is only liable on merchants.
00:58Banks have also been advised to ensure that merchants do not pass the cost to the consumers directly.
01:06UPI apps should not impose platform fee or hidden charges on users as has been advised by the NPCI as
01:14well.
01:14So which transactions will remain free?
01:17A person-to-person transaction or payment will remain free.
01:21So there is no charge for you to send or to receive money from your loved ones, your family, friends
01:26via UPI.
01:27Also, payments to merchants of up to Rs. 2,000 will absolutely remain free.
01:33Together, remember, these account for 97.5% of the UPI transactions by volume.
01:39Now, P2P transactions actually account for 37% of the UPI transactions, person-to-person.
01:45And merchant payments of up to Rs. 2,000 account for another 60.5%.
01:50So this is a large chunk that actually goes out of the ambit of the MDR fee.
01:56Now, there is another exemption.
01:58The small merchants, including street vendors, will not pay MDR fee if they receive up to Rs. 1,000,000
02:05a month through the UPI QR codes under the P2PM category.
02:10So, the share of transactions that actually attract MDR will be even lower than 2.5%.
02:17So what about the essential services you ask?
02:20So some of the essential and low margin sectors will have a completely different rate.
02:25Say, for instance, for your railway booking, for your telecom payments, of your bills, your insurance payments, your fuel payments,
02:33agricultural inputs.
02:34All of these transactions of Rs. 2,000 or more in these categories will attract a flat MDR of Rs.
02:415 per transaction.
02:43And the government says this gives businesses more cost certainty.
02:46So what about the stock markets and mutual funds?
02:48Well, capital market transactions will have a much lower MDR.
02:52This includes payments to mutual funds, stock brokers, dealers for equities at 0.02%.
02:57And this will also be capped at Rs. 300 per transaction.
03:01The government says the lower rate is aimed at supporting retail participation in financial markets.
03:06So who truly benefits?
03:07Well, MDR will be shared across the UPI ecosystem.
03:11So this includes banks, payment service providers, UPI apps.
03:15And in August, we had seen the UPI processed about 29.8 lakh crores worth of transactions.
03:21So P to M transactions above Rs. 2,000 accounted for 5.99 lakh crores or roughly about 20%
03:27of the UPI transactions via value.
03:30And at 0.4%, the maximum MDR on this amount would be around 2,400 crores a month.
03:35That works out to nearly 28,000 crores a year.
03:39But the actual amount will be much lower.
03:41There are also exemptions such as flat rates and transaction caps as well.
03:45So the key question again comes in, who will really benefit from the MDR and how will it be divided?
03:51So about 40% goes to the payer bank.
03:54This is the bank where the customer's account is held from where the money will come in.
03:59It handles the authorization security settlement.
04:02About 30% goes to the merchant bank, which manages the merchant relationship, the QR deployment and the settlement.
04:08About 20% will go to the UPI app or the third party application provider, the TPAP.
04:14And the remaining 10% goes to the payment service provider.
04:17This is the player that connects the technology partner bank to the UPI network.
04:22So which banks and apps could gain according to the data that's been analyzed as well.
04:27We are looking at and experts talk about like Pankaj Pandey has talked about how Yes Bank and Access Bank
04:32could be beneficiaries in the banking space at large.
04:35Paytm in the payment fintech ecosystem could actually benefit the most is what we are given to understand as of
04:41now.
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