Paytm to charge 1% MDR fee on wallet; set aside Rs 100 Cr for loyalty program for merchants to return the fee

Digital payments firm Paytm has announced that it will charge a 1% fee on merchant payments received through wallet, a move that will hurt merchants as the ongoing lockdown has already reduced the online payment volume.

A post by Paytm for Business said it will charge a 1% fee including 18% GST on receiving payment from wallets beginning May 4, 2020.

The 1% MDR or merchant discount rate is applicable to existing limits set by Paytm. There will be no charges for merchants accepting payments directly into their bank accounts via UPI.

The move will mainly impact those merchants who used to receive less than Rs 20,000 through Paytm wallet. Earlier, there was zero MDR fee for less than Rs 20,000 for wallets while merchants having transactions worth more than Rs 20,000 had to pay 2% as a fee.

"We have announced the 1% MDR so that we can cover the fees that banks charge us to load the wallet. We are returning the MDR charges to merchants by doubling the benefits for their business which includes various financial & business services that they use on our platform," a Paytm spokesperson said. 

According to Paytm, the new loyalty program aims to ensure that accepting digital payments is a rewarding experience for the kirana stores. It has also set aside Rs 100 crore for the initiative.

Entrackr reached out to some merchants but they were not aware of the new fee. 

A year ago, media reports suggested that Paytm would no longer absorb the MDR fee charged by banks. However, the company had refuted such reports saying that there would be no convenience fee charged on online transactions made on the platform.