Pull payments made on behalf of merchants: Acquirer banks should not push consumers to pay for services

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The Reserve Bank of India (RBI) needs to move towards creating an environment whereby for pull payments effected on behalf of merchants, the acquirer banks/Payment Aggregators (PAs) are not allowed to push consumers to pay for a payment service, according to a study by an IIT Professor.

Pull payments entail a recipient (for example a merchant) requesting payment. Ashish Das, Professor, Department of Mathematics, IIT-Bombay, in his study, ‘Charging Consumers for Merchant Payments’, emphasised that consumers have a relationship only with the core merchant and the issuer bank (that issues cards).

As such, it is grossly questionable for acquirer banks/ PAs to explicitly charge the consumers for merchant-initiated acceptance of digital payments, in the name of convenience fee, he added.

An acquirer bank provides necessary infrastructure to the merchant to accept payment and facilitate acceptance payments through cards.

PAs facilitate merchants to connect with acquirers. In the process, they receive payments from customers, pool and transfer them on to the merchants after a time period.

While extant RBI regulations prohibit payment-surcharge for debit cards, Das pointed out that the RBI, in a recent regulation (Guidelines on Regulation of Payment Aggregators and Payment Gateways), seems to have allowed a fee (convenience fee, handling fee) to be imposed onto consumers by PAs. This acts as a surrogate for payment-surcharge, he added.

In the guidelines, the central bank said: “…Information on other charges such as convenience fee, handling fee, etc., if any, being levied shall also be displayed upfront by the PA.”

‘Offer discounts’

Das felt that the government and RBI should encourage discounts in a merchant’s selling price/convenience feeswhen payment is through BHIM-UPI instead of any other payment modes that are relatively expensive.

Like IRCTC that offers such explicit discounts for accepting payments through BHIM-UPI, prominent e-commerce merchants may take a cue to promote BHIM-UPI. This would boost BHIM-UPI volumes, he said.

Bharat Interface for Money (BHIM) is a payment app that lets users make simple, easy and quick transactions using Unified Payments Interface (UPI).

“Ideally, expenditures to develop and promote asset-lite BHIM-UPI – an apposite digital alternative to cash – should be borne by the government and RBI.

“A budgetary support to the tune of ₹2,500 crore annually would on the one hand support BHIM-UPI and on the other render substantial savings on handling cash,” the study recommended.

Das underscored that a specific action-point on part of banks/PAs/payment networks/ RBI/ government should be to ensure that the ‘no surcharge rule’ is strictly applied and enforced for all merchant payments.

“Public awareness against surcharging should be promoted, along with developing streamlined processes of reporting a payment-surcharge and getting appropriate redressal,” he said.

The study said RBI’s Consumer Education and Protection Department needs to look into cases of merchants being overcharged by acquirer banks/PAs. These merchants are consumers availing the banking services, he added.

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