National Payments Corporation of India (NPCI), an umbrella organization for operating retail payments and settlement systems in India, has recommended an interchange fee to be applicable on merchant transactions on UPI (Unified Payments Interface) from April 1. NPCI stated that using Prepaid Payment Instruments (PPIs) such as PayTM wallets, and credit cards for transactions through UPI will result in an interchange of up to 1.1 per cent of the transaction value for sums exceeding Rs 2,000.
The interchange charge is often applied to credit card transactions and is assessed to defray the expenses of transaction acceptance, processing, and authorization.
Following the announcement, NPCI issued a statement clarifying that there is no charge to customers. Moreover, there are no fees for standard UPI payments, i.e, bank account-to-bank account transactions. “The interchange charges introduced are only applicable for the PPI merchant transactions. And there is no charge to customers” NPCI said further adding, “It is further clarified that there are no charges for bank account to bank account based UPI payment (normal UPI payments).”
For various types of merchants, there are varying interchange fees. It varies from 0.5% to 1.1%, and in some categories, a cap is also applicable. The interchange charge is 0.7% for telecom, education, and utilities/post offices whereas it is 0.9% of the transaction value for supermarkets. Insurance, government, mutual funds, and railroads will all be subject to 1% charges, while fuel and agriculture would each be assessed 0.5% costs, as per a CNBC report.
In India, UPI is now the most popular payment method for customers to immediately transfer money between bank accounts using their smartphones. In contrast, PPIs are online wallets that let users save money and send payments, such as Paytm, PhonePe, and Google Pay are available. An interchange fee is a cost incurred by one bank while executing a transaction with another bank. The bank of the merchant pays the bank of the payer the interchange fee in the event of UPI transactions.
The NPCI will evaluate the price on or before September 30, 2023.