Credit card for UPI may drive up the costs for small business ..

Credit card transactions using UPI –

UPI transactions are the most convenient and technology plays a major role in transfers .Crores of Small merchants , and vendors will start using plastic money if they start using Credit Card transactions with the Unified Payments Interface (UPI) . This is definitely a move for cardholders to be a happy about but there is one thing that this will lead to their overheads . The proposal is made that the credit risk and interest cost on these transactions should be separated from the MDR rates .The cost of providing free credit of up to 45 days on to these small businesses will definitely lead to cost overheads. Almost 13,000 crore Rs every year are paid by retailers to the banks to meet one month free credit costs .The savings for the merchants who already accept credit cards can always be passed on through discounts to customers, thereby boosting sales.

Delinking of costs – Ashish Das, a professor in the mathematics department at IIT-Bombay says that the widening the acceptance of creditcards for small shops, in absence of the delinking proposal, it would have an inflationary impact as credit card fees are twice that of debit cards, while a merchant pays nothing for receiving moneyvia UPI. On every Rs 1,000 transaction, the merchant pays Rs 10 for debit card payments and Rs 20 if it is by way of credit card. These costs cannot be surcharged .They have to be built into overall costs. The number of customers using UPI today is far more than credit cards, so the argument that the merchant will lose out on the customer does not hold good.

Transparency in the transactions is required –

According to das , there is lack of transparency in the the transactions because the payment receipts issued by the merchant do not account for the additional unaccounted money extracted by the payment aggregator and acquirer banks. There has to be a proper relationship between consumer and the one who collects the additional moneyalonh with GST . But these kind of relationship do not exist which is the reason why the transactions are not clear.

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