Skip to main content

Visa cuts fee on card transactions, industry says business as usual

 Visa cuts fee on card transactions, industry says business as usual
The company hopes that the rate cut will drive greater digital adoption, both for consumers and merchants
The steep cuts in data processing charges by leading card network Visa recently will have little impact in improving card acceptance in India as the economy is mainly cash dependent, said industry executives. Visa cut its fee per transaction by up to 95 per cent for transactions below Rs 2,000 and the company also reduced its charges for higher-value payments to Rs 1.5 from Rs 2.99 per transaction
Usually, these charges along with banks’ fee as issuers and merchant acquirers are borne by the merchants. The company hopes that the rate cut will drive greater digital adoption, both for consumers and merchants.Over the last 18 months, debit card has rapidly evolved from being a mere ATM cash withdrawal tool to a powerful digital payment means for Indian consumers across segments. This further reinforces our belief that the established base of over 800 million debit cards across India will be pivotal in the country’s efforts to go digital, said a spokesperson from Visa.
However, this cut may not prove enough to drive digital transactions in the country even though a major chunk of transactions are below Rs 2,000.Merchant discount rate (MDR), which is the cost of a transaction, is structured in a way so that it is largely shared between the card issuing bank and merchant acquiring bank with payment processors and aggregators taking a very small share of what’s left, experts said.Currently, the MDR is capped at 0.4 per cent for transactions up to Rs 2,000 and at 0.9 per cent for transactions above that amount for debit cards.
However, post-demonetisation, the government sought to ramp up digital transactions and introduced subvention scheme for merchants for small transactions. Under this scheme, merchants don’t pay anything for accepting payments of up to Rs 2,000 through debit or credit cards. The fee of 0.4 per cent applicable on such transactions is borne by banks which are in turn subsidised by the government.
Thus, it’s only the banks for which the cuts will be beneficial as their cost of operations will come down, experts said. However, even there, the impact won’t be much because major networks such as Mastercard and Visa take away only a small portion of their costs. Payment industry players also told Business Standard that this is not a one-way revision as card networks review their costs every quarter and structures shift on each review.
“This is not going to change anybody’s life except make it a little cheaper for banks to process digital transactions,” said Jitendra Gupta, MD, PayU. “These networks change their fee every quarter so there’s nothing new about Visa revising fee and already the government is subsidising the category where the biggest cut has been made.
So, it’s not likely to improve card acceptance in the country.”India is hugely under-penetrated when it comes to usage of plastic money. There were 1.8 million point-of-sale machines in India which have now gone up to 3 million, according to Reserve Bank of India (RBI) data.
However, credit cards still account for 51 per cent of the transactions in the country even as 96 per cent of plastic cards issued are debit cards. Meanwhile, this could also be a move by the company to counter RuPay’s increasing dominance which is now being issued by 1,000 banks across the country. RuPay is looking to close the gap with MasterCard and Visa in terms of volume and value of transactions, said Naveen Surya, chairman, Payments Council of India.
“This is a regular market-driven revision. All payment networks review their commercials from time to time,” Surya said. RuPay transactions increased to Rs 654 billion through 667 million transactions recorded on PoS machines as well as e-commerce, according to NPCI data.
NPCI hopes to pip Mastercard or Visa both of which have similar market shares of about 30-40 percent each and become the second largest player in the debit cards market by the end of this financial year. A card company executive said on condition of anonymity that charges have been made lowest in only that category which the government is subsidising.“We are not going to make any changes on our structures just because Visa has cut its rate. It is important to note that it also hiked service fee from 0.035 per cent to 0.055 per cent which is likely to make up for their lost revenues in high volume transactions where there is no government subsidy.”

The Business Standard, New Delhi, 14th June 2018

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s