Fintechs pick up the MDR tab, enjoy merchant’s float

Fintechs to use MDR tabs

According to industry reports, BharatPe and Paytm are two of the companies that provide this form of payment. Emails submitted to the two firms elicited no replies as of the time of publication.

Financial Technology(Fintech) intermediaries have devised a groundbreaking settlement mechanism that allows them to waive the merchant discount rate (MDR) on offline card transactions in order to extend their merchant networks. This encourages offline retailers to postpone the payment of a contract by not paying the MDR and instead of settling it the next business day. When the deal is settled, the payment broker has recourse to the merchant’s float.Fintechs pick up the MDR tab, enjoy merchant’s float

To be sure, retailers can only opt for a waiver of the MDR, which is usually 2% to 3% of the sales price, if they were extremely cash-strapped. It wouldn’t make sense for them to give up the float if they didn’t have to.

According to industry reports, BharatPe and Paytm are two of the companies that provide this form of payment. Emails submitted to the two firms elicited no replies as of the time of publication.

PayU India’s senior VP and policy director, Mohit Gopal, believes the procedure isn’t actually false. “This does happen on the offline page. It’s good as long as it’s profitable for both the fintech and the retailer. “If it’s a cash-flowing retailer, this is an appropriate thing to them,” he added.

When a customer swipes their wallet, the retailers have two options: apply for a daily settlement or collect the money within 15 days by using the app, according to a representative from a fintech that provides this service. “We also waived the MDR penalty after 15 days. For both sales, we pay the fee to the relevant bank,” the executive said. Except for Rupay, where MDR is still 0, his company assumes MDR on card-based transactions is headed for a 2% mark.

Mswipe’s EVP of merchant onboarding, risk, and settlement, Sachin Shettigar, told the interviewer that the company does not give merchants a deferred settlement option and instead pays all of its merchants on a T+1 basis and on the same working day for QR transactions. Shettigar said, “This is in accordance with the RBI 2009 directives for merchant payments by intermediaries.” The sole exception is for internet sales, in which transfers should be made on a T+1 basis, with the T based on the merchant’s agreement.

Fintechs will use their discretion for mediation procedures because the RBI’s 2021 rules on the control of payment aggregators and payment gateways do not apply to offline players. The Reserve Bank of India (RBI) did not respond to emailed questions about its position on the 15-day offline mediation option. According to a former RBI executive, the invention resembles a credit commodity. “If this occurs, it is shocking because it would include banks and card networks, which are more likely to be compliant than fintechs. “I don’t think the RBI would be pleased with this,” he said.

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