MasterCard: The Cost of E-Commerce Transaction via Credit Card is (Still) Too High

The payment issue in e-commerce industry remains unsolved. One of issues related to this is the transaction via credit card or widely known as Merchant Discount Rate (MDR), since the transaction cost applied by this bank is considered to be way higher that traditional business.

In an occasion, MasterCard Indonesia’s Director and Country Manager Irni Palar stated:

“This MDR issue is still actual for e-commerce. MDR for e-commerce is higher than traditional retail. While in traditional retail the sum may up to 1,8 percent, in e-commerce the number could go as high as 2 percent.”

Palar also explained that the trend is caused by banks’ consideration suggesting that the risk for serving e-commerce players is higher than traditional players. This is based on banks’ standard measurement, which is based on the risk and balance concept.

In e-commerce, the transaction is done virtually. That’s why the banks regard it as more risky as they must conduct extra solid supervision towards each transaction.

The high MDR cost results on the low volume of transaction done via electronic payment, worsen by the fact that the players in e-commerce industry are those newcomers and SMEs. Currently, the percentage of electronic payment only reaches 10%, dominated by credit card payment. This makes more and more parties attempt to educate the banks so that they’re willing to be less hard to e-commerce, in order to lower down the MDR cost.

In the same occasion, a research by Brand &Marketing Institute (BMI) Research on e-commerce ecosystem in Indonesia in 2014 showed that the total e-commerce transaction during 2014 reached Rp 21 trillion, and was projected to raise significantly this year. BMI Research suggested that the average online spending of Indonesians in a year reached Rp 825.000 per person.