TDR vs MDR: Simplified Ways to Look at the Balance

Posted by Mohammad Hassan on January 25th, 2019

A TDR is a transaction discount rate and MDR is a Merchant discount rate. If you are a newbie in the world of online businesses, understanding the terminology is essential to go ahead with choosing a Payment Gateway Integration. If understanding bywords are getting hard, here is a simplified way to understand TDR vs MDR aspects.

Explore the Simple Payment Flow and the Terms Associated with TDR vs MDR

There are certain ways by which TDR vs MDR can be simplified. Have a look at some of the ways which will be beneficial for you.

Aggregator/ Gateway

As we know, a payment gateway technology enables online money transactions between the merchants and the customer. Moreover, customers are now preferring their own method of making payments. People buy online products and pay from their own convenient platforms. The work of a payment aggregator is bringing all the modes of payment under one roof and allowing the user more flexible options and choice.

Authentification

Stores that have a busy business scheduling and deal with large volumes of money on a regular basis must have proper authentic gateways. It is essential for the payment gateway platform to verify you and protect you from fraudulent transactions. For example, in India, RBI has made it mandatory to undergo two levels of authentication. These areas follow:

• Payment Details Verification: This process of verification helps the payment gateways to recognize your card's issuing bank and furthermore, make the process faster.

• Verification of User to Authorization: This process is completed through CVV/PIN or OTP. When you enter these numbers correctly, you are actually telling the bank along with the payment gateway that you are the person who is using the payment mode. Additionally, they will exactly come to know who has requested the payment.

Acquiring or Issuing Bank

These two words sound quite similar but they can also get confusing at times. To put it simply, the acquiring bank is the one that facilitates the transaction via the gateway. On the other hand,  the issuing bank is the one through which the customer makes the payment.

Therefore, TDR vs MDR is actually an important factor which you must know before getting hold of a payment gateway integration.

Merchant/ Nodal Account

According to RBI's definition of Nodal account, it is basically an account which is created by an e-commerce site, payments gateways, e-wallets, and aggregations. This is done specifically in order to enable accepting digital payments. A merchant account is a temporary virtual account which accepts online payments. The gap between TDR vs MDR must have a balance so that you can have a secure payment option for online transactions. Merchant accounts are created by the service provider that acts as temporary vaults.

Capture

Purchasing online is an important task. People can choose their own preferred mode of transaction. A payment gateway receives the money and then transfers it to the receiver or the store owner. There is a request that is sent from the sender to the receiver. If the receiver does not raise this ‘capture’ request within a given period of time, the amount goes for a refund.

Settlement

After capturing the transaction, the Payment Gateway integration has to go for a settlement with the receiver. At times, the money does not reach the receiver, which can be due to a lot of issues. For example, authorization issues, and capture issues in the maximum number of cases. The transfer usually takes 1 or 2 days to reach the merchant's account. The bank first transfers the amount to the payment gateway nodal account, and then, they send it to the merchant's account. This is known as settlement. The TDR vs MDR works perfectly during the settlement.

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