The zero MDR has affected the PoS business: Worldline's Deepak Chandnani

In-store shopping saw a slowdown due to the pandemic, but change is around the corner. And the ubiquitous point-of-sale (PoS) machine will be back in focus. The Paris-headquartered Worldline acquired Ingenico in a $8.6-billion deal in October last year, making it Europe’s largest (and the world’s fourth-biggest) merchant acquirer and payment processor. India has some 5.2 million PoS units, but a country of our size needs more, DEEPAK CHANDNANI, managing director, Worldline (South Asia and the Middle East), tells Raghu Mohan. Edited excerpts:

How has the zero merchant discount rate (MDR) at point-of-sale played out? 

Across the world, in the payments business, the MDR is a significant source of revenue for industry players. In India, this was the case too, until the zero-MDR on certain products was introduced. However, companies still face the same costs — acquisition, deployment, platform, servicing costs — that they did before MDR was cut. This has meant diminished margins. It leads to the obvious — reduced investment in innovative solutions and a reduced rollout of PoS units in the smaller cities and towns. It also means that emerging players with not-so-deep pockets can be left in the lurch.

Often times, it is these emerging players that come out with cost-effective innovative solutions. This is not favourable for such a critical sector like digital payments. The Report of the Committee on the analysis of the Quick Response or QR Code published in July last year echoed the industry’s view and suggested that the government should allow for a lower controlled interchange instead of a zero MDR.

From a revenue perspective, is there more to the PoS business than just the MDR as a fee? Or, are there other earnings streams as well?

Depending on only one stream can be catastrophic to a business if something adverse were to happen to it. Most businesses have multiple earnings streams, and the payments sector is no different. That said, the MDR accounts form a good chunk of revenues for players deploying and operating PoS terminals, and thus, overall revenues and profitability have been negatively impacted.

Are check-out counters EMI-ready in the post-Covid world? How is this going to alter the way people shop and pay?

The PoS world has been EMI-ready well before Covid and will continue to be so, going forward. While transactions at physical stores have certainly dipped because of the lockdowns and reduced physical shopping, we expect a full recovery in the coming months and EMI along with that. In our view, EMI will grow agnostic of the pandemic because it gives customers the ability to buy high-value white goods in comfortable instalments. Stores, especially those selling white goods, also want EMI-ready terminals because it attracts customers. Brands, too, are promoting EMI at multiple touch-points across the country to sub-vent purchases of their brands.

How will your acquisition of the Ingenico Group shape the payments industry, and what does it mean for consumers in India?

The acquisition of Ingenico has enhanced our leadership position globally as well as in India, and we are now in a superior position to cover the entire payments value chain. Our existing and new partners can now leverage a broader range of innovative solutions in physical as well as the online payment space. As we continue to empower merchants with multiple payment acceptance modes, consumers benefit with the availability of seamless digital payment options.

How is Worldline helping to boost sales, manage inventory, and build customer loyalty?

Through all our channels, PoS or payment gateway, we have enabled multiple acceptance channels so that purchases can be made through cards, QR, Link pay, Amazon Pay, among others. In addition, EMI services at PoS help large merchants to offer high-value goods at comfortable instalments while SMS-linked “Pay at PoS” eliminates the need for customers of small merchants to be physically present at the store to authenticate transactions. SoftPoS helps micro-merchants and SMEs to transform their mobile into a PoS and also helps to create a digital storefront with inventory tracking and online ordering for their customers. The in-built discounting, payment by links and “Khaata” features in SoftPoS are powerful tools for merchants to build loyalty with their regular customers.

How is India placed as a breeding ground for innovation?

India has leapfrogged many countries as far as payments innovation goes, and a good amount of credit goes to the government and regulator. The Unified Payments Interface (UPI) is obviously a shining example of the extent of innovation done in the payments space in India. Beyond UPI, there are other innovations, such as “SoftPoS”, where merchants can accept payments through multiple channels, including through near-field communication cards. There is a significant amount of innovation happening to make transactions far more seamless and secure, as well as onboarding merchants in a swift manner.  

The Reserve Bank of India introduced a cohort under the regulatory sandbox and set up an innovation hub, in order to spur innovation by leveraging technology to primarily cover the unserved and underserved. With a draft framework to set up a pan-India New Umbrella Entity (or NUE) for retail payment systems in place, and timely developments like pilot schemes for offline transactions and increase in contactless transactions limits, we will certainly see more use cases in the coming months.