TMKKK removes 1.5% commission on operations with debit and credit cards


The State Bank of Pakistan (SBP) has removed the 1.5% mandatory minimum fee that banks charge merchants for financial transactions through debit and credit cards and allowed financial institutions to charge less than 1.5% to promote digital technologies. banking.

The central bank left the maximum fee at 2.5%, according to a statement released on Friday.

Additionally, SBP has made it mandatory for all e-commerce players and online payment acceptors in Pakistan to start accepting card payments by June 30, 2023.

Earlier, gas stations stopped accepting payments by debit and credit cards and demanded the removal of the 1.5 percent fee.

Also, petroleum product dealers and oil marketing companies (OMCs) such as Pakistan State Oil (PSO) have sought permission from concerned authorities to collect additional amount from cardholders so as not to harm their profit margins. However, the authorities did not accept this demand.

In order to facilitate the acceptance of card payments, the lower range of the merchant discount rate (MDR) (minimum commission), i.e. 1.5%, has been removed.

“All e-commerce/online payment acquirers operating in Pakistan will be allowed to accept Domestic Payment Scheme (DPS) card for card not present (CNP) transactions at their respective payment gateways till June 30, 2023.”

In addition, an Interchange Fee (IRF) for cards issued in Pakistan used at domestic POS (Points of Sale) terminals is charged at a maximum of 0.2% for payment made using debit and prepaid cards and a maximum of 0.7% for credit cards.

The IRF is not an additional charge but remains part of the MDR, which is a maximum of 2.5%.

Prominent digital banker Sohail Malik, who spoke to The Express Tribune, said MDR has been a thorny issue since the beginning, but removing the minimum charge is “the right step towards promoting digital banking”.

He noted that merchants prefer to accept payments in cash rather than cards and online, as transaction fees are paid by them and not by debit and credit card holders.

‚ÄúThis (elimination of minimum payment) is a good thing for digital transactions. This is part of the State Bank’s strategy to increase the use of digital cards.”

He noted that this decision will help reduce cash-based transactions and simplify economic documentation.

There are about 45 million debit and credit cards in the country. However, most cardholders use the cards to withdraw cash from ATMs. “Hardly 5-10% use cards at POS.”

Prominent oil dealer Malik Huda Bakhsh said dealers pay banks Rs 1.75 per liter for transactions made through debit and credit cards. This undermined their limited and regulated profit margins.

Abolishing the minimum wage has been a long-standing demand. “We raised this issue in a meeting with the Minister of State Oil Musadik Malik on Sunday last week,” he said.

According to Bakhsh, the minister assured them that he would talk to the central bank and other authorities to remove the fee.

In its Payment System Review for the quarter ended March 31, 2022, TMKKC said the number of POS machines reached 96,975, while the number of payment cards fell slightly to 47.2 million from 48.7 million in the previous quarter.

In the quarter ended March 2022, 38.3 million POS transactions worth Rs 189.7 billion were processed, a quarter-on-quarter growth of 21.9% in volume and 6.5% in value.

A total of 9.1 million e-commerce transactions worth Rs 27 billion were processed digitally, a quarter-on-quarter decline of 32.7 percent in volume but a 1.3 percent increase in value.

In addition, the number of ATMs increased by 1.1% compared to the previous quarter. The value of ATM transactions was Rs 2,437 billion.

Published in The Express Tribune on March 19th2023.

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