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23 August 2024 at 9:59:04 pm

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain...

Hidden Economics

The reassuring part of the new Unified Payments Interface (UPI) framework is that customers will apparently not be charged for using UPI. The more interesting part is who, then, pays for keeping one of the world’s most widely used digital-payment systems running. From October 15, a Merchant Discount Rate (MDR) of 0.4 percent will apply to specified person-to-merchant transactions above Rs. 2,000, with a ceiling of Rs. 300 on transactions of Rs. 75,000 or more. Person-to-person payments remain free irrespective of the amount, while merchant payments up to Rs. 2,000 remain free. Small merchants receiving up to Rs. 1 lakh a month through UPI QR codes will also continue to enjoy zero MDR. The government says roughly 96 percent of merchant transactions will remain unaffected. So, technically, the customer is exempt. MDR is not a tax collected by the government or NPCI. It is a charge within the payments ecosystem, to be shared among banks, payment-service providers and UPI application providers. But that does not make the economics irrelevant to customers. A merchant who previously accepted a large UPI payment at no direct payment cost will now have to absorb a fee. The government has advised banks to ensure that merchants do not pass the MDR on to customers. The economic reality is less tidy. Businesses ultimately recover costs through their overall pricing. Whether the new charge appears as a visible surcharge, a change in discounts or simply becomes part of the cost of doing business will depend on the merchant and the market. That is why the real beneficiaries of the new framework are not necessarily the customers alone. Payment companies, banks and other participants in the UPI ecosystem acquire a new revenue stream from transactions that were previously free. Paytm, for instance, has said the new MDR will generate additional revenue from merchant transactions that earlier carried no such charge. The money is therefore being redistributed within the payments ecosystem. Small businesses are deliberately insulated, an important distinction in an economy where street vendors and neighbourhood shops have adopted QR payments because they are cheap and frictionless. There is also a larger question. UPI became ubiquitous partly because its basic proposition was brutally simple: instant payments without a visible charge. Introducing MDR for a slice of transactions changes that economic model. The government’s argument is that UPI needs a sustainable financial architecture as its scale grows. But sustainability should not be confused with costlessness. Someone has to finance the infrastructure, security and technology behind a system processing billions of transactions. For now, the customer remains protected. The real test will be whether merchants absorb the cost without quietly transferring it through prices and whether the revenue flowing to banks and fintech companies translates into a stronger, more resilient UPI ecosystem rather than simply a new source of income for its intermediaries.

BMC auctioning three land parcels to raise funds, says Aaditya

Correspondent
Oct 18, 2024
2 min read

Updated: Oct 22, 2024

Aaditya

Mumbai: Shiv Sena (UBT) leader Aaditya Thackeray on Thursday alleged Mumbai’s civic body had decided to auction three land parcels to raise funds and make up for the “loot” of the metropolis by the Eknath Shinde government.


The Brihanmumbai Municipal Corporation, which is being run by an administrator now, has decided to auction the Chhatrapati Shivaji Maharaj Mandi (Market), the Brihanmumbai Electric Supply and Transport (BEST) Malabar Hill Receiving Station and the Worli Asphalt Plant, Thackeray pointed out.


“The sale of Mumbai is being done by the Eknath Shinde regime to benefit its favourite builders and contractors,” he alleged.


A criminal investigation will be conducted into the matter after the Maha Vikas Aghadi government comes to power, Thackeray added.


“So on one end, they looted the BMC and Mumbai and gave the money to their favourite contractors. Now, by auctioning these iconic and important land parcels, the BMC will be left without both funds and plots,” the Shiv Sena (UBT) leader and former state minister claimed.


When Shiv Sena started controlling the BMC in 1997, its finances were in deficit but by 2022 his party turned around the fiscal health of the civic body, Thackeray said.


Alleging that the Shinde government wants to drive Kolis and fisherfolk out of Mumbai, he said, “We will oppose this. It has to remain and be made into a fish market, and (should be) in the ownership of the BMC.”


Aaditya puppet for urban naxals: Shelar

Bharatiya Janata Party ( BJP ) Mumbai chief Ashish Shelar has called Uddhav Thackeray’s son and Shiv Sena (UBT) leader Aaditya Thackeray as a puppet for urban naxals after former’s comments on the Dharavi Redevelopment project and has also challenged him for a debate.

Ashish Shelar said that the project is a necessity and a priority project, adding that Uddhav Thackeray-led Shiv Sena and Congressleader Varsha Gaikwad are peddling lies.

Aaditya Thackeray seems to have become the spokesperson of urban Naxals. Without studying the subject (Dharavi) in detail, Aaditya Thackeray is speaking like an ignorant. I have seen that these people have been trying to set a narrative regarding Dharavi and the re-development work,” Ashish Shelar said.

He challenged Aaditya Thackeray and Varsha Gaikwad in a debate on the Dharavi Redevelopment Project.

“Uddhav ji and the people of his party – Aaditya Thackeray and Varsha Gaikwad have started this false narrative regarding Dharavi. I openly challenge Aaditya for a debate. I want to ask him that 70 per cent of the homes in the Dharavi Redevelopment Project will go to Marathi people, Muslims and Dalits. It is their rightful home, so why are they putting roadblocks by creating a false narrative?”

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