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Fees on UPI payments: Why users need not worry, Check Details

Fees on UPI payments: Why users need not worry, Check Details

The Unified Payments Interface (UPI) network’s interchange charge has just been fixed by the National Payments Corporation of India (NPCI) at 1.1% for merchant transactions started using PPIs such as mobile wallets.

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The NPCI circular states that the adjustments take effect from April 1.

What is an interchange fee

A fee paid for accepting and processing online transactions is known as an interchange fee. While transactions over Rs 2,000 are subjected to the 1.1% broad interchange, NPCI has set up various merchant charge schemes for PPI payments on UPI that vary by business.

Fees on UPI payments: Why users need not worry, Check Details

Source: Google

In the agriculture and telecommunications sectors, some merchant categories are subject to a lower interchange fee.

What is a PPI

Online wallets (like Paytm Wallet, PhonePe Wallet, and Amazon Pay Wallet) and preloaded gift cards are examples of prepaid payment instruments (PPI). A PPI payment made through UPI means a transaction done through a wallet, such as PhonePe Wallet, using a UPI QR code.

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This means that users will be charged an interchange fee of up to 1.1% on transactions above Rs 2,000 if they have money in their PhonePe Wallet, and want to pay a merchant using their UPI QR code.

Fees on UPI payments: Why users need not worry, Check Details

Source: Google

What this means for UPI users

Recently, NPCI emphasized in a statement that “UPI remains free.” According to the regulatory body’s circular, these interchanges will not be relevant to P2P and P2M transactions between “the bank account and the PPI wallet.” NPCI stated in a statement, “Linking a bank account in any UPI-enabled app to make payments has historically been the most popular UPI transactions method, accounting for over 99.9% of all UPI transactions. These Bank account-to-account transfers are still free for both consumers and businesses.”

Who will have to pay these charges

This works similarly to how merchants are charged for customer credit card payments, also known as the merchant discount rate (MDR). PhonePe will be paid the appropriate interchange charge by the retailer if you pay for a PPI by UPI at a store and the QR code is that of PhonePe. This charge is not necessary for users to pay.

Fees on UPI payments: Why users need not worry, Check Details

Source: Google

What the 1.1% interchange fee means and who is it for

The issuer of a PPI should pay 15 bps (basis points) as wallet loading service charge to the remitter bank (account holder’s bank) for loading transaction value greater than Rs 2,000. This is if users make use of UPI to load their wallets through their bank accounts.

“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. The interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers, and it is further clarified that there are no charges for the bank account to bank account based UPI payments (i.e. normal UPI payments),” added NPCI in its statement. “With this addition to UPI, the customers will have the choice of using any bank accounts, RuPay Credit card and prepaid wallets on UPI enabled apps,” added NPCI.

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