The opportunity to grow digital payments in India is enormous, with just about 10% of the total merchant community in the network, but tinkering with fees associated with electronic transactions could slow the adoption rather than promoting it, said Mastercard CEO, Ajay Banga.
There is no empirical evidence that either a low merchant discount rate (MDR) or the absence of it promotes digital transactions. On the contrary, any such move takes away the incentive for intermediaries, who are vital for acquiring customers, Banga said in a telephonic interview. He was speaking to ET two days after the announcement that he would be elevated to the position of executive chairman.
MDR is the fee charged by banks and payments companies from merchants or shop owners for providing them payment settlement infrastructure, or point-of-sale (PoS) machines.
“We need to find a way to ensure economic sustenance for this model,” he said. “My view is that commercial sustainability in these decisions is very important. There are a lot of studies to show that this is the right way to think about it.”
“I think the RBI (Reserve Bank of India) has been very fair and transparent. I don’t have a lot of advice for them, it is one of the best regulators in the world,” he said.