No commission on e-deals to payment firms, says SBI

India’s largest public sector bank just tightened its purse strings when it comes to sharing revenues with its payment partner firms for digital transactions. The bank makes use of services of online payment aggregators, firms which enable people to pay through State Bank of India (SBI) gateways using their debit cards and get paid a share of the commission that the bank collects.

In an email sent on May 14, SBI informed its payment partners that it is not going to share any fee with them if the transaction going through its payment gateway is of less than ~1,000 and originated from a non-SBI debit card.

The email, reviewed by Business Standard, gives no rationale for taking such a decision even as the subject line calls it “rationalisation of merchant discount rate”. The merchant discount rate (MDR) is the cost of a digital transaction usually charged to a merchant every time a customer swipes a card. This MDR is distributed between involved payment players, including banks, card networks, and payment aggregators.

However, to give a fillip to digital transactions, the Government of India (GoI) decided to reimburse MDR on customer transactions up to ~2,000. This is done through eight major banks, including SBI, which receive the money from the government based on actual transaction volumes and they are responsible for distributing it to payment firms depending on their contracts and policies.

The email from SBI says as much and claims that the bank is indeed receiving 0.40 per cent of each transaction worth up to ~2,000. The Reserve Bank of India recently cut MDR on transactions and capped it at 0.4 per cent for debit card transactions of value up to ~2,000, which the government is now responsible for paying.

“As you are aware that the

bank is claiming MDR at 0.40 per cent from the RBI/GoI for transactions up to ~2,000. First such claim will be lodged during this month,” the email says and adds that the bank has decided to “suitably compensate” payment aggregators for transactions going through

SBI payment gateway.

Under the new revenue-sharing arrangement, aggregators will hardly make any money if the consumer’s debit card is not an SBI one. For instance, there is no commission sharing for transactions up to ~1,000 and even for those between ~1,000 and ~2,000, the bank will only share 0.05 per cent of the transaction value and applicable taxes. However, the bank pays 0.15 per cent for transactions done through its own cards.

This is set to hit the aggregator industry in a big way as companies such as PayU, CCAvenue, and BillDesk process payments worth billions of rupees in digital payments each month and almost all payment aggregators have an SBI payment gateway.

“We are going to see a substantial impact in our top line and profitability because of this anti-industry move as SBI payment gateways are connected to almost every big e-service and a lot of transaction flows through their pipes,” said a payments company chief executive officer (CEO), confirming receipt of the email from SBI.

He added that this circular is applicable from January 1, which means it retrospectively impacts five months of business that payment firms did with SBI without having clarity on their share of commission.

“This is not how you expect a bank as big as SBI to behave, a few hundred millions could be loose change for them, but our businesses depend on this revenue stream. We were not consulted at any point during the process,” he added.

According to estimates, SBI operates more than 800,000 point-of-sale machines and its payment gateway is used by seven big aggregator companies.

Under the new revenue-sharing arrangement, aggregators will hardly make any money if the consumer’s debit card is not an SBI one