UPI Waives off Merchant Discount Rates With New Category
With the onset of digital payments sweeping India’s small businesses off its feet, the NPCI has issued a new category for UPI payments to help small businesses deal with online payments.
How? The new category — P2PM Category, waives off the Merchant Discount Rate for small businesses that carry inward transactions of up to INR 50,000.
The new category was introduced to help small merchants and the retail sector with UPI transactions. Merchants who will receive UPI payments up to Rs. 50,000 per month will be eligible for acquisition under the P2PM category.
Once the merchants are acquired under P2PM category, they will not be allowed to charge them MDR.
What is Merchant Discount Rate?
MDR is a fee charged by banks and Fin-tech companies for offering payment-acceptance infrastructure to businesses. The MDR for merchant UPI transactions stands at 0.25% for transactions under Rs. 1,000 and 0.65% for all other transactions.
How does UPI Transactions work under this new category?
In early January, banks had issued a proposal to the Government to allow small businesses to be onboard as peers, which spares them MDR rates.
Once the merchant is acquired by the bank or fin-tech company, they will be allowed a cooling-off period of three months. During this time, if there are inward UPI Payments amounting to Rs 50,000 per month for three consecutive months, they will get acquired by the P2M (Peer-to-merchant) category and begin paying MDR.
The new P2PM category is an addition to the existing P2P (Peer to Peer) and P2M (Peer to Merchant) categories of UPI.
P2PM category pricing and charges will be the same as the P2P category. According to the NPCI, while all P2PM category transactions will be settled as P2P, they will still fall under merchant transactions.
Also Read: What does the future of UPI Payments look like?
Other ways that UPI can help small businesses:
The NPCI (National Payments Corporation of India) and the GST Council of India have entered into an agreement to give GST credits to customers and shops that use UPI-based QR codes.
Some reports say that the UPI-based QR codes could also become mandatory for businesses or physical shops over a certain threshold. What’s more? The QR codes may also be introduced in GST invoices in the long run.
Fintech companies are also introducing UPI into the gamut of online payments as an effective loan repayment mode, hoping this will increase loan repayment rates among small businesses and individuals alike. This is mainly due to the spike in UPI payments in the country over the last year alone.
Till now, a total of 733.54 million P2P transactions worth Rs 1.52 lakh crore were made using UPI.
Also Read: NEFT, RTGS or UPI — What suits your business best?
