Have an online business? Save Rs. 1.5 Lakh Per Month Using Paytm Payment Gateway

Digital payment platform UPI is poised for an upward trajectory going forward. The Reserve bank of India (RBI) said that it expects 50% annualized growth for UPI over the next few years. The RBI is targeting a 3X increase in digital payment transactions by 2025, and UPI is expected to be the primary driver of this growth. The RBI is also looking at the possibility of linking credit cards to the UPI virtual payment address (VPA), since credit components have been out of UPI loop and adversely affected.

These predictions indicate that online businesses in particular will witness a growth in payments made via UPI. However, with growing online transactions come increasing transaction costs. With customers preferring to make UPI payments now more than ever, and its projected increase to never-before-seen levels, online businesses must factor in and compare merchant discount rates (or MDRs as they are commonly called) on payment gateways and how they can be minimized by choosing the most suitable payment gateway.

What is MDR, and how is it critical for online businesses?

MDR is the fee or charge incurred by a business on a payment received from its customer through a digital mode. The MDR is a fixed percentage of the payment amount and varies according to the mode of digital payment.

To give an example, when a business receives a payment of Rs 1,000 from a customer for a purchase made online or digitally, a portion of Rs 1,000 is earmarked as MDR cost, which goes to the payment gateway provider such as Paytm Payment Gateway (Paytm PG). Depending on the mode of payment, such as Paytm Wallet, credit card, net banking, etc., the MDR percentage varies. MDR is usually around 2% for debit cards, credit cards, and wallets. This means that on a payment of Rs 1,000 received through these modes, Rs 20 would go towards the payment gateway, and the business will receive only Rs 980.

Profit margins for online businesses are already hurting due to high transaction charges on digital payments, expenses in case of cancelled or returned cash on delivery orders, cut-throat competition, increasing customer acquisition costs, and logistics. MDR thus becomes critical for online businesses since the choice of integrating a payment gateway will affect the charges incurred by the business. Businesses can decrease the MDR and increase their profitability by choosing a payment gateway that charges a low or zero percentage as MDR. With UPI transactions bound to increase, this small MDR charge can accumulate to lakhs of rupees in a month’s time.

MDRs of major payment gateways: A comparison

The below table compares MDRs across major payment gateways:

As reflected in the table, Paytm PG has a 0% MDR on UPI, which makes it one of the few payment gateways in the country to allow businesses to accept UPI and Rupay payments with a zero charge. For example, for a customer purchase of Rs 1,000 via UPI, the business receives 1,000 entirely, without incurring any transaction charge, if the business is using Paytm PG to accept online payments.

This can be incredibly profitable for online businesses and result in extra savings. Let’s see how.

How online businesses can save around Rs 150,000 per month

Below is an example of an online business having monthly sales volumes of Rs 1 crore comprising online payments. This is divided into payments received through debit cards, credit cards, net banking, UPI and wallets. UPI is estimated to comprise 70% of these digital transactions, according to RBI’s payment systems indicator for April 2022.

The following two tables show how much a business will incur as payment gateway charges to Paytm PG and other payment gateways.

Charges incurred on other payment gateways:

As shown above, the difference in charges amounts to Rs 149,420, which is an added savings for a business with Paytm Payment Gateway every month. Not only does Paytm Payment Gateway have 0% MDR on UPI, it also has 0% MDR on RuPay debit cards, all this without set-up or maintenance fees as well.

Profitability with Paytm PG

At a time when online businesses face increasing competition and razor-thin margins, it is imperative for them to increase savings and profitability. As UPI adoption increases, business should move towards reducing monthly payment gateway charges.

With the Paytm Payment Gateway, an online business can ensure just that!