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Payments acknowledged through the wallet will be charged a 1% MDR fee, says Paytm

Paytm used to charge a fee of 2% to those merchants receiving payments of more than Rs 20,000 per month and no fee for those receiving below.

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Source: National Herald

The extending lockdowns have disrupted the order and flow of nearly everything. Adversely affected sectors are commerce and e-commerce. Consequently, online payment volume has already plunged, and now Paytm’s current change in its policy in MDR fee has left merchants wounded.

1% MDR fee on every transaction accepted through wallet

The digital payment firm Paytm lately announced through its notification panel to the business accounts that it will be charging a 1% MDR (Merchant Discount Rate) fee including 18% GST on every transaction accepted through Paytm wallets. This policy has already come into effect from 4th May 2020. However, there will be no charges on payments directly accepted through UPI into the bank accounts.

Paytm justifies the move

Paytm justifies this move by calling it a cover of losses it suffers by paying banks for loading the wallet. The government had suspended these MDR Fees back in January 2020 for any UPI or Rupay transactions on which the Paytm’s CEO Vijay Shekhar Sharma didn’t seem to agree on much. He talked about how zero MDR in Rupay and UPI discourages the rollout of digital payments infrastructure by banks while creating the perverse incentive to mine transaction data for sale as an alternate way to monetize.

Paytm offers compensation to the ‘merchants at loss’

Formerly, Paytm used to charge a fee of 2% to those merchants receiving payments of more than Rs 20,000 per month and no fee for those receiving below. So basically this feature is going to hit the small merchants as the big ones have benefited by their fee directly cutting down to half of the previous.

Hence, Paytm has claimed to return the MDR fees in the form of enhancements in other services such as doubling the benefits for their business which includes various financial & business services that they use on Paytm’s platform. Also to further lessen the losses of merchants due to transaction charges, Paytm announced Rs 100 crores loyalty program for grocery stores. Moreover, it ensured the Merchant partners to become eligible for earning reward points for accepting payments from Paytm Wallet, Rupay Cards, and all UPI based payment apps.