Here’s About The New Umbrella Entities 

New Umbrella Entities are being considered, according to RBI’s Governor Shaktikanta Das. In March 2021, the RBI had received requests from about six consortiums to establish a retail payments management, clearing, and settlement business to compete with the NPCI. Governor - Shaktikanta Das emphasized that although the New Umbrella Entity (NUE), for which the Reserve Bank of India (RBI) had begun accepting applications in March 2021, has been postponed, but the idea is still in place.

 

After receiving a flood of applications from groups made up of leading banks, payments companies, and conglomerates, RBI has not provided any updates regarding the review of the applicants.

 

"I acknowledge that there has been some delay. This is primarily due to the fact that the same NUE officials handling the problem are also working on other projects. We are assessing it "Das spoke with the media following the unveiling of the monetary policy’’.

 

New retail digital payment systems should be installed, managed, and run by the NUE, just like the NPCI. Additionally, it will oversee clearing and settlement systems and lead initiatives to improve the nation's digital payments ecosystem. About six consortiums have submitted proposals to the RBI to establish the company.

 

In the first consortium, Jio Platforms is joined by Facebook, Google, and SoHum Bharat. Along with Kotak Mahindra Bank, HDFC Bank, Airtel Digital, Flipkart, Mastercard, and PayU, the Tata Group is also the consortium's leader. In the third consortium, along with ICICI Bank, Axis Bank, Visa, Pine Labs, and BillDesk, is e-commerce behemoth Amazon. The CEO of Paytm, Vijay Shekhar Sharma, has stated that the company is competing against Ola Financial, Policybazaar, and IndusInd Bank, among others.

 

Aside from the uncertainty around the new entity's income model, there have been some worries about data storage and localization standards.

 

Banks, payment service providers, UPI participants, and NPCI do not receive a cut of transactions made via the Unified Payments Interface (UPI) or RuPay debit cards because they are non-profit organizations that operate according to government regulations.

 

According to industry sources, a competitor that charges MDR for any different goods may not be able to compete and will have to follow the Zero-MDR norm if it chooses to split the weight of UPI transactions. "On the revenue model, further clarification is still required. How will there be competition if there is no revenue? Additionally, there are issues with data storage standards and security. Thus, the reason for the delay is that both applicants and the regulator are considering these issues "on the condition of anonymity, a source in the banking sector stated’’.

 

The NUE must have a minimum paid-up capital of Rs 500 crore, and no single promoter or promoter group may own more than 40% of the NUE's capital, under the RBI's draught framework. The entity shall maintain a minimum net value of Rs 300 crore at all times.

 

The fee assessed to a merchant for processing debit and credit card payments is known as the merchant discount rate (MDR). Before accepting and/or approving the use of debit or credit cards for payment processing, the merchant must agree to or commit to the terms of the service that they have set up. The merchant discount rate is often known as the bank fee that is assessed to a business when customers use credit and debit cards to pay for goods and services. As retail sales rise, the bank may reduce the rate. Typically, merchants pay a fee of 1% to 3% for each transaction that is processed.

 

The transaction discount rate is another name for the merchant discount rate (TDR).

 

•    A merchant is charged a fee called a merchant discount rate, or MDR, for processing debit and credit card payments.

 

•    The transaction discount rate is another name for the merchant discount rate (TDR).

 

•    MDR is expressed as a percentage of each completed sales transaction.

 

The total of all fees and taxes associated with electronic or digital payments is represented by the merchant discount rate. The MDR might, for instance, include bank fees for digital payments made by clients and suppliers. The MDR also accounts for the transaction processing fees that the payment aggregator will pay to banks or virtual or mobile platforms.

 

Interchange costs, other fees (such as cross-border fees, zero-limit fees, etc.), gateway and point-of-sale fees, and assessment fees may also be included in the MDR.

 

MDR is typically expressed as a percentage of the total amount of processed transactions. The volume of business transactions processed, the kinds of cards clients use (debit or credit), and the average transaction value all affect the rates (also known as average tickets or average sales). The interchange fees are typically the main factor in determining the discount rate.

 

In essence, a customer purchases a merchant's products or services and then pays with a debit or credit card. A point-of-sale (POS) device at the retailer's physical location can be used to complete the transaction. There is a fee from the merchant bank (MDR). The credit card issuer bank, the payment network (Visa, MasterCard, etc.), and the bank that provides the POS terminal or device divide the MDR fee that the merchant bank has collected. 

 

When merchant processors set their prices, the following variables are typically significant:

1.    Industry risk at a broad level

 

2.    Internet, terminals, etc. are methods of processing credit card payments.

 

3.    Volumes of credit sold annually

 

Payment processing costs are essential for maintaining infrastructure and services, which in turn promotes international e-commerce. Numerous payment alternatives, including credit and debit cards, continue to rise in popularity and promote economic activity thanks to payment processors, quicker transaction processing, and automated point-of-sale systems.

 

A service provider known as a payment aggregator helps retailers to enable digital or e-commerce transactions. They let businesses to take credit and debit card payments without going through a bank to get a merchant account.

 

For each type of card transaction, interchange fees are assessed by the card organizations.

 

A business that a merchant hires to handle transactions through various channels, such as cards for merchant acquiring banks, is known as a merchant processor.

 

Charges imposed on a business or cardholder as a result of their use of a debit or credit card. Each of Visa, Mastercard, and Discover establishes a minimal, fixed-rate percentage that is deducted from the total of all credit or debit card transactions made each month.

 

The POS terminal is a gadget that merchant outlets use to process credit and debit card payments.