Digital payments: 10 per cent decline necessitates plugging the loopholes

As per data released by the Reserve Bank of India, digital payments fell 10.2 per cent in volume terms and 7 per cent in value terms during January 2017 compared with December 2016. The total number of digital transactions fell to 922.9 million in January from 1,027.70 million in December. In value terms, the number declined to Rs 98 lakh crore in January from Rs 105.40 lakh crore in December. This data includes digital wallets and mobile banking transactions, electronic fund transfers, and those on credit and debit cards, among other methods such as Unified Payments Interface (UPI) and Unstructured Supplementary Service Data (USSD).

Several committees formed by the government, including the Committee of Chief Ministers on Digital Payments have suggested the rationalisation of merchant discount rate, or MDR, on debit card and credit card transactions. The chief ministers’ panel has recommended, in its interim report, that a detailed review of MDR regime should be undertaken by this month. “The committee has already forwarded its recommendations on the subject to the RBI. The new regime should consider change in technology, business models of payment service providers & anticipated increase in digital transactions,” the panel said in its report.

The Centre had announced that state-owned petroleum companies would offer a discount of 0.75 per cent of the sale price to consumers on purchase of petrol or diesel if payment was made through digital means such as cards, wallets, etc. However, this move also ran in troubled waters later when the petrol pump owners threatened to strike over the burden of MDR. Ultimately a truce was agreed upon when it was decided that the oil PSUs would bear the burden.

It has also suggested that by March, all the public sector banks should be mandated to extend their technology infrastructure to all the 56 Regional Rural banks (RRBs) so that these RRBs also become a part of interoperable Aadhaar Enabled Payment System (AEPS), UPI and USSD.

Apart from the transaction charges that are levied by banks to merchants, and eventually passed on to the consumers, a plethora of convenience charges are also levied by service providers involved in giving online services. Convenience fee is charged by various ticket booking operators for services such as movie tickets, air tickets, etc and is either a flat charge, or a percentage of the total booking amount. In 2013, the Maharashtra state government had issued a notice asking theatre chains and booking platforms to stop charging extra for tickets that are booked online.

Online entertainment ticketing platform BookMyShow, which charges a percentage of tickets booked as internet handling charge that adds to the cost of the booking, has justified the fee, calling it the company’s “bread and butter”.

“Hi User! The internet handling fee is charged for the online ticket booking service provided by us. We were always charging the fee for online ticket booking with us. A notification prohibited us from doing so for some time. Now that it has been stayed, we have resumed charging it. We try to keep it as reasonable as possible and as per market rates. This is our bread and butter. This is how we ensure that you get the best of service,” BookMyShow said on its website in the FAQ section.

Similarly, airlines also charge the convenience fee that is added to the total fare of the air ticket. “A convenience fee of Rs 75 per person per flight for netbanking/cash cards and Rs 150 per person per flight for credit/debit cards is collected by the airlines establishing, maintaining and operating the online booking system, to enable the passengers to book the air tickets online while using a credit/debit card. This fees includes the charges paid by the airlines to the concerned bank (varies from one bank to another) for availing of such facility,” according to information provided by India’s largest airline IndiGo on its website. It has also said that the convenience fee is non-refundable.

On the contrary, government provided services have taken the lead in providing incentives to boost digital payment tools. Apart from petrol pumps, the state-owned fuel retailers, IOC, BPCL and HPCL will offer “an upfront discount of Rs 5 on every LPG refill to all LPG customers who will book and pay for it online”. Furthermore, in the Union Budget for 2017-18, finance minister Arun Jaitley announced that no service charge will be levied on tickets booked through IRCTC. Currently, Rs 40 on every ticket booked in air-conditioned classes and Rs 20 on every ticket booked in sleeper class is levied by the IRCTC when ticket is booked through its website. “Service charges on e-tickets booked through IRCTC will be withdrawn. Cashless reservations have gone up from 58 per cent to 68 per cent,” Jaitley said while presenting the Budget.