Zero Merchant Discount Rate (MDR)

Introduction:

Merchant Discount Rate (MDR) is the rate charged by payment gateways to a merchant for payment processing services on debit and credit card transactions. Fees typically range from 1% to 3% for payment processing of each transaction. For example, if a merchant accepts payments using cards worth Rs. XX,XXX then the merchant will have to pay an MDR of Rs. XXX on it.

The Government of India has promoted Digital Payments over multiple initiatives in the past few years, one of which was an announcement in the Finance Minister’s Budget Speech 2019 removing the MDR charges applicable on payments made through the following mode:

• Debit Cards powered by Rupay.
• United Payments Interface (BHIM-UPI).
• Unified Payments Interface Quick Response Code (UPI QR Code).

The rationale for this move was that MDR and the other fees involved in digital payments led to an increased cost for merchants which discouraged them from offering digital payment modes to their customers.

Problem Scope: 

MDR is deducted for every transaction done using the payment gateway’s service. But as per schemes initiated by the bank, merchants who satisfy the criteria are eligible for reversal of the entire MDR deducted earlier on a monthly basis. This means that the net MDR deducted is zero. Hence, the name Zero MDR. 

MDR reversal vouchers and a summary report are to be prepared which shows the list of merchants that are eligible for MDR cashback as well as those merchants who are not eligible for the MDR Cashback with relevant rejection remarks. The reports are being generated on a monthly basis by the operations team. The whole process is complex since it involves data mapping from various sources & calculating the MDR reversal amount. If the MDR reversal amount is not calculated properly & the merchant is credited less or more than the actual amount then it can lead to poor customer service & financial discrepancies. The process takes the productive hours of the team to generate the reports. The client’s team who generates the reports proposed automation and chose SheetKraft as the automation partner in order to optimize the process.

Before SheetKraft:

• The operations team was dependent on the central DB team to extract data from various database tables.
• Data is extracted from table 1 by specifying some eligibility criteria in the where clause of SQL query. After data from table 1 is extracted, it is passed in some other SQL query and executed again. This is done 7 to 8 times to arrive at the final dataset of eligible merchants. Extracting this data from the database tables is quite a tedious task as it takes a very long time for the queries to execute.
• After fetching the data, the team had to apply various checks & filter conditions in order to generate all the reports. Since the transaction volume is large the team faces issues in generating the files since they’re dependent on excel.

SheetKraft’s Approach:

This process is an end-to-end process and no human intervention is needed. Since various triggers are created using SheetKraft which are as follows:

• The activity will autorun at a specific date and at a specific time every month which is pre-defined by the business team.
• The process defined using SheetKraft will extract data from the various database tables and perform multiple calculations & checks along with graphical formatting of the output data.
• The output file which consists of the list of eligible and ineligible merchants for MDR cashback will be shared with the business team and the TTUM file which is generated will be directly uploaded in the Finacle system & shared with stakeholders via email.
• Emails will be sent to eligible as well as ineligible merchants with details of transactions for which they’ll be getting the MDR cashback or the file with details of transactions & appropriate rejection remarks due to which cashback was not given.

Overall Impact:

• Manual process involves high risk and high chances of error i.e., data being misplaced or some formulas with incorrect references might be used which is eliminated after onboarding SheetKraft.
• The operations team required around three days per month for the report generation but after onboarding SheetKraft it can be generated in 30 minutes.
• This in turn saves a good amount of time since no manual intervention is needed and also eliminates the risk of errors.
• Reports with summarized details of transactions and timely processing of MDR cashback encouraged merchants to accept various digital payments and this, in turn, increased transaction volumes for the payment gateway.

A process of 3 days was reduced to 30 minutes