MDR, or merchant discount rate, is the fee a merchant pays on every digital payment it accepts, expressed as a percentage of the transaction value and deducted before the money is settled. It is shared between the customer's bank, the merchant's bank, the card network and the payment gateway. In India, the government set MDR to zero for UPI and certain domestic debit card payments to merchants from January 2020, debit card MDR on other networks is capped by RBI, and credit card MDR is uncapped and commonly between 1.5 and 3 percent. Payment gateways usually quote one blended rate, often around 2 percent plus GST, that includes MDR and their own fee.
Why it matters
On a food order, MDR is small per transaction and large per month. Two percent of ₹3 lakh of card and wallet payments is ₹6,000, plus GST on the fee, every month, before the ordering software or delivery is paid for. Knowing which payment methods carry MDR lets you steer customers: UPI is free of MDR for the merchant under government policy, though a gateway may still charge a platform fee on it, while credit cards cost the most. It also helps you read a gateway's pricing page, since "2 percent" on one line and "zero MDR on UPI" on another can both be true. The numbers are in payment gateway charges in India.
Example
A customer pays ₹1,000 for a party order by credit card through a payment link. At a 2 percent gateway rate, the fee is ₹20 and GST on the fee is ₹3.60, so ₹976.40 reaches the restaurant's account on the settlement day. If the same customer had paid by UPI through a gateway charging nothing on UPI, the full ₹1,000 would arrive. For a restaurant doing 2,000 online orders a month at ₹500, if most of them currently pay by card, moving half of those customers to UPI could save on the order of ₹10,000 a month. What a gateway actually charges and when it settles is covered in Razorpay for restaurants.
On Tezzu, UPI and card payments run through Razorpay, and you can connect your own Razorpay account so that Tezzu adds no platform fee of its own on payments.