Have you ever wondered what happens every time you use your credit card or scan a DuitNow QR code to make payments? There’s actually a whole process behind it involving multiple parties from banks, payment gateways, and payment networks, all of which are processed within seconds of the transaction.

You may also have heard of something called the Merchant Discount Rate (MDR). Despite its name, this is not a discount for the consumer, but rather, it is a fee based on the transaction value that is used for the upkeep of these digital or electronic payment methods.

What is MDR?

The MDR can be seen as a combination of various charges essential for maintaining the security and efficiency of the electronic payment network. These charges include interchange fees, which are paid to the card-issuing bank and gateway provider, as well as network charges that go to payment networks like Visa or Mastercard. Collectively, the MDR covers the operational, technological and administrative costs of processing electronic payments.

Meanwhile, the actual MDR amount charged is usually a small, fixed percentage of the transaction value. So, who pays the MDR? Does the consumer bear this cost? The simple answer is no. MDR fees are charged to merchants only on transactions paid electronically, like those made through DuitNow QR or debit/credit cards. 

As an example, if the agreed MDR for ABC Supermart Sdn Bhd is 1%, it means ABC Supermart Sdn Bhd will pay 1% of all customer transaction value paid by electronic modes as MDR. But for customers, you’ll never see this fee added to your bill because it’s an operational cost the merchant bears to facilitate this transaction.

In Malaysia, the MDR varies depending on the merchant’s nature and the size of the business. Different payment providers also have different MDR rates, so business owners are free to compare which option works best for their business by directly contacting the respective providers. By doing so, business owners could also get the most accurate information, along with guidance on choosing the right payment solutions to enhance business efficiency.  

DuitNow QR: Accelerating Malaysia’s Digital Economy for Merchants and Consumers

The development of DuitNow QR is central to enhancing Malaysia’s financial ecosystem by enabling digital transactions without logging into your bank account or being eligible for a credit card. With DuitNow QR, anyone with a smartphone can make payments conveniently, allowing both customers and business owners to enjoy the benefits of a digital economy.

Benefits of Using DuitNow QR for Consumers

1. Seamless Transactions
   DuitNow QR offers a convenient and secure method for making payments directly from your smartphone. You can effortlessly complete your purchase by scanning the merchant’s QR code through your preferred e-wallet or banking app. For all the times you’ve forgotten your wallet or find yourself short on small change – with DuitNow QR, your smartphone is now also your wallet. 
   
   

2. Enhanced Safety & Security
   With digital transactions readily available at your fingertips, DuitNow QR eliminates the risks associated with carrying physical cash, such as loss or theft. The DuitNow QR ecosystem also employs advanced security measures, including end-to-end encryption, to protect against fraud and unauthorised transactions.
   
   Additionally, the security of your digital transactions is further enhanced by the security features of your preferred e-wallet or banking app, which typically include additional layers of authentication like biometric verification.
   
   
3. Cross-Border QR Payment
   DuitNow QR kicked off as a local digital payment solution, especially to the local communities, but its roadmap also included an ambitious cross-border payments ecosystem. Thanks to BNM and regional central banks in establishing cross-border QR code payment linkages, Malaysians can use their preferred e-wallet or banking apps to make payments even when they are abroad, in countries such as Indonesia (QRIS), Singapore (NETS) and Thailand (PromptPay).
   
   The transaction amount is converted to Malaysian Ringgit at competitive rates and automatically deducted from your e-wallet balance. With cross-border DuitNow QR, there’s no longer a need to wait in long lines at the money changer and no need to carry large sums of foreign currencies when you travel and come home with the unused amount!
   
   
   

Benefits of Using DuitNow QR for Merchants

1. Reduced risk and cost efficiency
   The benefits DuitNow QR brings to consumers also extend to merchants. With electronic payment transactions, business owners reduce the amount of physical cash stored on their premises. This not only lowers the risks like theft and loss associated with cash handling but also cuts down on operational costs related to cash management, such as counting, storing, and the time spent on bank visits for transfers and withdrawals.
   
   Moreover, DuitNow QR has one of the lowest MDR fees in the Malaysian market, capped at 0.5% per transaction, which is competitive compared to other electronic payment methods. And, at the time of writing, many DuitNow QR merchant acquirers have announced their intention to continue waiving MDR fees, particularly benefiting smaller businesses. After all, this waiver began during the COVID-19 pandemic as a means to encourage and accelerate cashless payments and reduce physical interactions.
   
   

2. Cross-Border QR Payments For International Customers
   The integration of DuitNow QR with foreign payment systems allows travellers from countries like Indonesia, Singapore and Thailand to make payments easily via their e-wallets or banking apps. This capability is especially beneficial for business owners. Any business that supports DuitNow QR now has a broader customer base of regional tourists who may be more inclined to spend at the establishment as they can use their home e-wallet or banking apps.
   
   On top of that, business owners who receive payments from international customers would also receive settlements in Malaysian Ringgit, eliminating the complexities associated with foreign currency transactions.
   
   

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In essence, DuitNow QR has helped Malaysia take a big step towards being a cashless society. The implementation of the MDR is crucial in this context as it ensures the sustainability of the DuitNow QR infrastructure, which ultimately benefits both consumers and businesses alike.

• TAGS:
• Digital Economy
• DuitNow QR
• DuitNow QR Cross-Border
• Merchant Discount Rate (MDR)