Your online transactions using a credit card might become cheaper very soon, once steps approved by the Cabinet are implemented. Currently, vendors and payment gateways pay a convenience charge, a user charge and a service charge to the government, which are in turn charged to the customer. The total amount payable to the government in case of each credit card transaction ranges between 1% and 2.5%. This move by the government towards discontinuing these charges is seen as a key step towards promoting digitally-enabled financial inclusion within the country. It is expected that even this relatively small reduction in transaction costs would play a key role in encouraging the use of electronic payment systems such as online credit card transactions.
Apart from the waiver of these charges, there are also plans in place to implement measures, which make it compulsory to use credit cards for transactions valued above a certain threshold level. This move is aimed at discouraging large cash transactions, which have potential tax evasion motives. With these changes being implemented, the currently recorded 569 million online transactions made in India till December of the current financial year is expected to increase even further. Even with the greater penetration of online transactions especially in tier I and tier II cities across India, the infrastructure of India’s digital transactions remains modest in comparison to cash transactions. Recent attempts at greater financial inclusion of small businesses, migrant labour and the low income group within India include the recent approval of payment bank licenses by the Reserve Bank of India to emerging online payment players such as PayTM.