Which one of the following best describes the term "Merchant Discount

Which one of the following best describes the term “Merchant Discount Rate” sometimes seen in news ?

[amp_mcq option1=”The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank.” option2=”The amount paid back by banks to their customers when they use debit cards for financial transactions for purchasing goods or services.” option3=”The charge to a merchant by a bank for accepting payments from his customers through the bank’s debit cards.” option4=”The incentive given by the Government to merchants for promoting digital payments by their customers through Point of Sale (PoS) machines and debit cards.” correct=”option3″]

This question was previously asked in

UPSC IAS – 2018

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Merchant Discount Rate (MDR) is the fee charged by a bank or a payment service provider to a merchant for processing debit or credit card transactions. It is typically calculated as a percentage of the transaction value. This fee is paid by the merchant to the bank for the service of facilitating card payments from customers.

– MDR is a charge paid by the merchant.
– It is paid to the bank or payment processor.
– It is for accepting payments through debit/credit cards.
– It is usually a percentage of the transaction value.

MDR includes fees paid to various parties involved in the transaction, such as the issuing bank, the acquiring bank, the payment networks (like Visa, Mastercard), and the payment gateway provider. The government has taken steps to lower MDR, especially for small value transactions and digital payments, to promote a cashless economy.

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