1.5% Fee on Debit and Credit Card Transactions is Eliminated by SBP

The mandatory minimum fee of 1.5% that banks were required by law to charge merchants on financial transactions made with debit and credit cards has been eliminated by the State Bank of Pakistan (SBP), and financial institutions are now permitted to charge even less than that amount to encourage the use of digital banking.

According to a notification released on Friday, the central bank has kept the fee’s upper ceiling at 2.5%.

Also, the SBP mandated that all online merchants and payment recipients in Pakistan begin taking card payments no later than June 30, 2023.

Before, gas stations stopped taking payments made with debit and credit cards and requested that the 1.5% levy be eliminated.

Also, to protect their profit margins from being impacted, oil marketing organizations (OMCs) like Pakistan State Oil (PSO) and merchants of petroleum products asked the relevant authorities for authorization before charging cardholders the additional sum. Yet, the request was rejected by the authorities.

The SBP notification reads:

“Lower range (minimum fee) of merchant discount rate (MDR), ie 1.5%, is abolished…in order to facilitate the acceptance of card-based payments,”

“All e-commerce/ online payment acquirers operating in Pakistan shall enable acceptance of domestic payment scheme (DPS) card for card-not-present (CNP) transactions on their respective payment gateways by June 30, 2023.”

Also, a maximum interchange reimbursement fee (IRF) of 0.2% for payments made with debit and prepaid cards and a maximum of 0.7% for payments made with credit cards would be applied to cards issued in Pakistan that are used on domestic POS (point of sale) terminals. IRF is included in MDR, which has a maximum 2.5% fee and is not a separate fee.

According to the SBP’s Payment System Evaluation for the three months ended March 31, 2022, there were 96,975 POS machines in use, while the number of payment cards dropped marginally from 48.7 million to 47.2 million compared to the previous quarter.

38.3 million POS transactions of Rs189.7 billion were processed during the three months that ended in March 2022, representing a quarterly gain of 6.5% by value and 21.9% by volume.

9.1 million e-commerce transactions of Rs27 billion were performed digitally, representing a 1.3% increase in value despite a 32.7% decrease in volume.

In addition, there were 1.1% more ATMs than in the previous quarter. The amount spent at ATMs was Rs2,437 billion.