What is Merchant Discount Rate (MDR)?
MDR (Merchant Discount Rate) is the fee charged to a merchant by the acquirer for processing a digital transaction. It is usually a small percentage of the transaction value.
How MDR Works
- A customer pays ₹1,000 at a store using a card.
- The acquirer charges the merchant a fee (e.g., 1.5% = ₹15).
- The remaining ₹985 is settled into the merchant’s account.
- MDR is shared among the acquirer, issuer, and payment network.
Benefits of MDR
- Covers Transaction Costs: Helps banks maintain a secure infrastructure.
- Encourages Innovation: Supports new digital payment services.
- Compliance & Security: MDR funds fraud detection and regulatory checks.
Is MDR Mandatory?
Yes, though RBI often caps MDR for certain categories (like UPI P2M under government subsidies).
FAQ
Who pays MDR, the merchant or the customer?
Merchants pay MDR. Customers usually pay nothing extra.
Is MDR the same across payment types?
No. MDR differs for debit cards, credit cards, UPI, and net banking.
How does Phi Commerce optimize MDR?
With smart routing and configurable MDR logic, Phi Commerce ensures merchants pay the lowest possible MDR while improving transaction success.