The State Bank of Pakistan (SBP) has abolished the mandatory minimum fee of 1.5%, which was being charged by banks from merchants on financial transactions done through debit and credit cards, and allowed financial institutions to charge even less than 1.5% to promote digital banking.
The central bank has maintained maximum limit of the fee at 2.5%, according to a notification issued on Friday.
Besides, the SBP made it mandatory for all e-commerce players and online payment receivers in Pakistan to start accepting payments through cards maximum by June 30, 2023.
Earlier, fuel stations had stopped accepting payments through debit and credit cards and demanded the abolition of 1.5% fee.
Also, petroleum product dealers and oil marketing companies (OMCs) like Pakistan State Oil (PSO) sought permission from the authorities concerned for recovering the additional amount from cardholders so that their profit margins were not compromised. The authorities, however, turned down the demand.
“Lower range (minimum fee) of merchant discount rate (MDR), ie 1.5%, is abolished…in order to facilitate the acceptance of card-based payments,” read the SBP notification.
“All e-commerce/ online payment acquirers operating in Pakistan shall enable acceptance of domestic payment scheme (DPS) card for card-not-present (CNP) transactions on their respective payment gateways by June 30, 2023.”
Besides, interchange reimbursement fee (IRF) for cards issued in Pakistan used on domestic POS (point of sales) terminals shall be charged to a maximum of 0.2% on payment done through debit and prepaid cards and 0.7% maximum on credit cards.
IRF is not an additional fee, but remains part of MDR, which stands at a maximum of 2.5%.
Talking to The Express Tribune, known digital banker Sohail Malik said that the MDR had remained a pain point since the beginning but the elimination of minimum fee “is a sound step towards promoting digital banking.”
He pointed out that merchants had preferred to accept payments in cash instead of cards and online, as the transaction fee was paid by them and not by debit and credit card holders.
“That (abolition of minimum fee) is a good thing for digital transactions. This is part of the State Bank’s strategy to increase the use of digital cards.”
He emphasised that the decision would help reduce cash-based transactions and facilitate the documentation of economy.
There are around 45 million debit and credit cards in the country. However, a majority of the cardholders use cards to withdraw cash from ATMs. “Hardly, 5-10% use cards at POS.”
Well-known petroleum dealer Malik Khuda Bakhsh said that the dealers were paying Rs1.75 per litre to banks on transactions made through debit and credit cards. It was compromising their profit margins, which were limited and regulated.
The abolition of minimum fee was a longstanding demand. “We raised the issue in a meeting with State Minister of Petroleum Musadik Malik on Sunday last week,” he revealed.
Bakhsh said that the minister had assured them that he would talk to the central bank and other authorities to get the fee abolished.
The SBP said in its Payment System Review for the quarter ended March 31, 2022 that the number of POS machines had reached 96,975, while the number of payment cards fell slightly to 47.2 million from 48.7 million compared to the previous quarter.
During the quarter ended March 2022, 38.3 million POS transactions amounting to Rs189.7 billion were processed, showing quarterly growth of 21.9% by volume and 6.5% by value.
A total of 9.1 million e-commerce transactions amounting to Rs27 billion were processed digitally, showing quarterly growth of 1.3% in value, though volumes declined by 32.7%.
Besides, the number of ATMs increased by 1.1% as compared to the previous quarter. The value of ATM transactions stood at Rs2,437 billion.
Published in The Express Tribune, March 19th, 2023.
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