PETALING JAYA: Retailers are calling for a lower merchant discount rate (MDR) for card purchases to lower business costs in view of the impending increase in taxes.
While most retailers have been absorbing the MDR, they said a lower rate would allow them to maintain a healthy margin that will eventually benefit the consumers with continuous supply and no price increase.
MDR is a transaction fee charged to retailers when accepting card payments, such as debit, credit and charge cards.
In general, the MDR for credit and charge cards was higher than the MDR for debit cards.
Malaysia Retailers Association vice-president Datuk Ameer Ali Mydin said the MDR is a part of doing business where merchants pay the bank for the payment facility without having to take the credit risk.
“The general rate is usually 1% or higher for credit cards and 0.5% or less for debit cards, while some banks may waive it sometimes.
“It is where banks charge a small amount for the movement of money, allowing the transaction for businesses and consumers.
“The MDR can be further lowered or waived to encourage merchants that have been operating on small margins,” he said.
Ameer Ali, who is Mydin Mohamed Holdings Bhd managing director, said bigger retailers usually pay a small MDR and small retailers pay a higher MDR due to smaller sales volume.
“Most retailers will absorb the MDR as part of the cost of doing business.
“A lower MDR will mean a lower cost of doing business, which would automatically pass on to customers at lower prices,” he said.
Ameer Ali noted that the MDR also involved a “bigger picture”.
“When consumers pay by credit cards, the banks only pay us on the next weekday.
“It should be looked at in reverse when banks pay the merchants because they are advancing payments that they will only collect back much later.
“The MDR is hence charged to compensate for the risks they take, for the credit raised and for advancing the payment to merchants,” he said.
Ameer Ali said the recent concerns of banks delaying payment to merchants over public holidays and weekends made sense but more aspects should be considered.
“Of course, if banks can pay us on weekends we will be more than happy. But we have to have to be fair and look at the details of transactions,” he said.
Small and Medium Enterprises Association of Malaysia (Samenta) national president Datuk William Ng pointed out that it may not be possible for merchants to receive payments made via credit card in real-time, due to issues such as potential card fraud and the use of foreign-issued credit cards.
Ng also called for a lower MDR, as some banks imposed as much as 4% for certain charge cards.
“Some banks require retailers to achieve a certain business volume, failing which such facility could be withdrawn or a fixed fee charged,” he said.
Retailers, he said, generally do not pass on the MDR, except those selling high ticket items with ultra-low margins, such as certain electronic goods and jewellery, especially gold products.
“The majority of retailers have been absorbing these MDR, contributing to the low margin of most retailers.
“The problem is especially pervasive among SME retailers since they are not able to benefit from scale in purchasing and operations.”
Given the strong direction by Bank Negara for the transition to epayments, Ng said it would make sense that the MDR be capped at between 1% and 1.25%, which should cover the interchange fees and present banks with a small profit.
“Bank Negara should step in and discuss with banks how the rates can be minimalised.
“This will ease the cost pressure on retailers, and help in keeping prices low for consumers.
“As it is, some retailers are not accepting credit cards or even e-wallets and prefer cash, and this leads to tax leakages and fuels the shadow economy.
“To plug this hole, a cap on the MDR, supported by incentives from promotional support from the government, would encourage a greater transition to epayment,” he said.
Ng also called on more SME retailers to accept ewallets and to use DuitNow.
“Besides cutting down on disbursement time, it helps SMEs to track their sales and cash flow, while reducing risks of thefts and pilferage,” he said.
