Why IRCTC has refused to use payment gateways of these banks

Indian Railway Catering and Tourism Corporation (IRCTC) has barred many banks from its platform and refused to use their payment gateways, according to Financial Express (FE).

The reason behind the discord is the sharing of convenience fees. The banks have refused to share a portion of the convenience fees, earned on customer transactions, with IRCTC, calling it a violation of the principles of the merchant-acquiring business.

In a normal case, merchants who use the services of a bank for accepting card-based payments typically pay the bank a charge, referred to as the merchant discount rate (MDR).

“Normally, the merchant pays the acquiring bank. But, since IRCTC does not pay us, we were recovering our costs from customers and that is how it had been all these years,” said a senior executive with State Bank of India talking to FE.

SBI is one of the banks which has refused to accept the demand of IRCTC and has been barred from the platform. Owing to this new rule, SBI is losing 50,000 transactions.

Currently, the IRCTC website allows card-based payments only for cardholders of Indian Overseas Bank, Canara Bank, United Bank of India, Indian Bank, Central Bank of India, HDFC Bank and Axis Bank.Post-demonetisation, IRCTC had waived the convenience fee of Rs 20 it was charging customers.

Amidst the standoff, the Indian Banks’ Association (IBA) is understood to have been discussing the issue with IRCTC and the Indian Railways with a view to resolving the matter.

Earlier, Payment gateway provider PayU had announced its collaboration with IRCTC to provide users a safe and secure option to pay for rail tickets booked via various payment options like internet banking, debit/credit card and e-wallet.

Prior to that, FreeCharge had also tied up with IRCTC to provide digital payments and ticket bookings in November 2016.

Irctc: Website