The RBI’s move will help improve the payments ecosystem Why has the RBI put the charges in payment system under review? Is there merit to charging for payments?

The failure rate with UPI transactions is increasing (at over 1.4 per cent) as the efficiencies of the existing systems cannot be improved in the current cost structure. Levy of charges may de-bottleneck this situation. From a user perspective, it makes sense to swap the carrying cost of cash with the cost of making payments through a card or mobile phone. Therefore, the RBI’s thought process of monetarily rewarding the stakeholders in the payments ecosystem for their efforts in aiding increased digitisation of payment infrastructure holds merit.

What categories of digital payments are under review for their charges?

Levies across all categories of digital payments – IMPS, NEFT, RTGS, UPI and payment instruments such as debit cards, credit cards and prepaid instruments are under review. There are four types of charges – merchant discount rate (MDR), intercharge (carved out of MDR and shared with the payment issuer), convenience fee (charged by merchants for providing service) and surcharge (charged for processing a transaction through a certain payment mode in addition to MDR). Much of the discussions revolve around MDR and intercharges.

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