The merchant discount rate (MDR) is a cost factor that merchants must take into account when accepting payments from customers. As one of the cost factors to be borne by merchants, the MDR should be taken into account when setting prices or accepting cashless payments.
In this article, you will learn what MDR is, how it affects businesses, examples of its application and its rates.
What is the merchant discount rate?
The Merchant Discount Rate (MDR) is a fee that business owners or merchants pay to payment service providers for each non-cash transaction. In other words, the MDR is an administrative cost that is charged to merchants when customers make cashless payments.
How is the MDR applied to transactions?
For example, if your merchant account has an MDR rate of 1% for debit card transactions and a customer pays Rp1 million with such a card, the payment is processed via an electronic data capture (EDC) device. If the transaction is successful, the EDC service provider deducts 1% of the transaction amount, or in this case Rp 10,000, so the amount credited to your account will be Rp 990,000.
However, the MDR is not just a fee charged to merchants for the services provided by the payment service providers. Payment service providers use these fees to maintain the network and payment infrastructure to ensure smoother cashless payments.
How the MDR affects your business
The MDR can have a significant impact on your business, especially if you frequently process cashless payments. Find out below how the MDR can affect your business:
1. Net business profit
As a cost borne by merchants, MDR has a direct impact on your net profit. The higher the MDR rate and transaction amount, the more your net profit decreases. Conversely, lower MDR fees mean higher profits for your business.
Although cashless payment methods incur MDR fees that can reduce net profit, offering these payment options is still beneficial. Customers prefer cashless payments because they are more convenient and faster, making transactions easier and more attractive. The more customers transact with you, the higher your potential revenue.
To optimize your profitability, you should choose payment service providers with competitive MDR fees.
2. Providing payment options for customers
MDR is a crucial factor when deciding which payment methods to offer to your customers. Give more preference to payment methods or service providers that charge lower MDR fees to minimize costs.
Alternatively, focus on payment methods with a large user base, especially among your target customers. This way, you can increase transaction volume while maintaining healthy profit margins.
You can also work with payment providers to offer special promotions or offers for customers. For example, offering exclusive discounts to credit card holders of certain banks can lead to more transactions.
Understanding MDR rates for each cashless payment method
It is important to know that MDR rates vary depending on the merchant category, transaction value and payment method used.
For payment methods such as QRIS (Quick Response Code Indonesia Standard) and chip-based electronic money, MDR rates are regulated by Bank Indonesia (BI). However, the BI as the payment regulator does not receive a share of the MDR fees. Instead, these fees are passed on to issuers, acquirers, intermediary institutions, the Indonesian Payment Systems Association (ASPI) and the National Settlement Agency for Electronic Transactions (PTEN).
For other payment methods, such as debit and credit cards processed through EDC machines, the MDR fees are determined by the issuing bank or payment service provider.
Here you will find an overview of the MDR rates for debit and credit cards, chip-based electronic money and QRIS:
1. MDR rates for debit and credit cards
The MDR rates for transactions with debit and credit cards via EDC machines are between 0.15% and 2%. These rates depend on the type of card used and the agreement between the service provider and the merchant.
2. MDR rates for chip-based electronic money
Chip-based electronic money refers to payment instruments in card form that store a monetary value. Examples include BCA’s Flazz card, Mandiri’s e-Money, BRI’s Brizzi and BNI’s TapCash.
BI sets the MDR rates for chip-based electronic money according to two schemes: 0.5% MDR for regular transactions and 0% MDR for Government-to-People (G2P) and People-to-Government (P2G) transactions, such as social welfare payments, tax payments, passports and donations.
3. MDR rates for QRIS
BI determines the MDR rates for QRIS transactions based on the merchant type and transaction category. Below is a breakdown of the QRIS MDR rates:
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Is there a minimum balance required for Aspire Business Accounts?
No minimum balance is required to keep your SGD, USD and IDR* Accounts activated.
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To create a recipient or make any transaction on your IDR Account, you'll need to have a minimum balance of IDR 10,000 on your account.
