1.1% fee on UPI transactions above Rs 2,000, but who pays that?
NPCI said in its circular that Peer-2-Peer (P2P) and Peer-2-Merchant (P2M) transactions between a bank account and a PPI will not require an interchange fee. Read to know who pays the interchange fee recommended by NPCI.
The National Payments Corporation of India (NPCI) recently released a circular in which it recommended a 1.1 per cent interchange fee on certain merchant UPI transactions above Rs 2,000, made using prepaid payment instruments (PPI) like online wallets.
As per the circular issued on March 24, the changes will come into effect from April 1, 2023 and the above pricing will be reviewed on or before September 30, 2023.
But the question is who pays this charge? Many on social media are confused about the NPCI’s recommendation, worrying if they will have to bear the brunt of the interchange fee.
No impact on customers
But as per the NPCI’s circular, the interchange fee of 1.1 per cent will have no impact on the end-customer and UPI transactions will remain free for them.
NPCI said in its circular that Peer-2-Peer (P2P) and Peer-2-Merchant (P2PM) transactions between a bank account and a PPI will not require an interchange fee.
Essentially, this fee will only apply to digital wallet transactions made via merchant QR codes, which are likely to be paid by the merchant acquirer to the wallet issuer. Therefore, neither the merchant nor the customer is directly impacted by the interchange fee.
Paytm Payments Bank also issued a clarification on the circular. On Twitter, it said, “Regarding NPCI circular on interchange fees and wallet interoperability, no customer will pay any charges on making payments from #UPI either from bank account or PPI/Paytm Wallet.”
While interchange fees are paid by merchant acquirers to wallets or card issuers, it could end up impacting merchants if it is passed on to them. However, smaller merchants and shopkeepers are unlikely to be impacted as it is applicable only on payments of over Rs 2,000.
The fee will have no impact on customers who use PPIs like wallets for UPI transactions right now, but they could be impacted later if merchants decide to pass on the burden.
NPCI also said the PPI issuer shall pay 15 basis points as a wallet loading service charge to the remitter bank (account holder’s bank) for loading transaction value greater than Rs 2,000.
This means when a customer loads a digital wallet for UPI transactions, the PPI issuer will have to pay a charge to the remitter bank. While this does not have any impact on the customer at the moment, this could impact customers if wallet issuers decide to pass on this additional charge to customers.
In a fresh press release issued today, NPCI offered more clarity on the interchange fee. “Recent regulatory guidelines, the Prepaid Payment Instruments (PPI Wallets) have been permitted to be part of the interoperable UPI ecosystem. In view of this, NPCI has now permitted the PPI wallets to be part of the interoperable UPI ecosystem,” NPCI said.
“The interchange charges introduced are only applicable for PPI merchant transactions and there is no charge to customers, and it is further clarified that there are no charges for bank account to bank account based UPI payments (i.e. normal UPI payments),” it added.
NPCI also said that with this addition to UPI, customers will have the choice of using any bank accounts, RuPay Credit card and prepaid wallets on UPI-enabled apps.
Source: India today
