SBP revises IRF and MDR for payment cards

In order to improve payment card acceptance infrastructure in Pakistan, the State Bank of Pakistan (SBP) has revised Interchange Reimbursement Fee (IRF) and Merchant Discount Rate (MDR). According to the SBP, during the past few years, there has been considerable growth in the digital payment infrastructure of the country, especially in the number of debit cards being issued by banks to their customers.

Although, the Point of Sale (POS) infrastructure has also grown during the past few years, its growth has largely remained restricted to high value merchants in big cities. Some of the key challenges being faced by the POS acquiring industry in Pakistan include high Interchange Reimbursement Fee (IRF), lower than cost Merchant Discount Rate (MDR) to onboard high value merchants and less interest by banks in offering low cost domestic payment cards to their customers.

In order to address the above challenges and increase the POS card acceptance infrastructure in the country especially at retail level, in line with the objectives of National Payment System Strategy (NPSS), it has been decided that MDR for POS acquiring in Pakistan will be within the range of 1.5 percent to 2.5 percent for both existing and new merchants.

However, the merchant categories including government and utilities, education and fuel will be exempt from this requirement. The Interchange Reimbursement Fee (IRF) for debit and prepaid cards issued in Pakistan used on domestic POS terminals will be capped at 0.5 percent.

In addition, card issuers will offer SBP approved Domestic Payment Scheme (DPS) Card as the default card at the time of issuance or renewal of debit cards. Accordingly card requesting customers will be offered for either an exclusive DPS card or a DPS card co-badged with an International Payment Scheme (IPS) or an exclusive IPS card upon written request of the customer. The SBP said that these instructions will come into effect from April 1, 2020.