Fee Of Up To 1.1% On Merchant Transactions Above INR 2000: NPCI As per the circular issued on March 24, the changes will come into effect from April 1, 2023
By Teena Jose •
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National Payment Corporation of India (NPCI) in a recently released circular has recommended a 1.1% interchange fee on certain merchant UPI transactions above INR 2000, 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.
The fee will be charged depending on the service provided. For example, 0.5% will be charged on fuel-related payments, 0.7% for telecom, utilities/post-office, education and agriculture transactions and 1% for court costs, tax payments and insurance sales.
Later, the NPCI clarified that the interchange fee of 1.1% will have no impact on the end-customer and UPI transactions will remain free for them. It is also added that Peer-2-Peer (P2P) and Peer-2-Merchant (P2PM) transactions between a bank account and a PPI will not require an interchange fee.
""Interchange charges are only applicable for the prepaid payment instruments (PPI) merchant transactions and there is no charge to customers," NPCI, payment gateway, clarified in a statement.
In simple words, the charge will kick in when a customer having a wallet of one particular company makes a payment to a merchant, who has a wallet of another company.
Responding to this development, Paytm has tweeted that, "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."
Mohak Marwah, senior manager, growth advisory, Aranca, has opined on this development that, "The interchange fees on UPI transactions carried out through a prepaid payment instrument (PPI) such as mobile wallets must be paid by merchants to mobile wallet companies like Paytm, Amazon Pay, Google Pay, and PhonePe. As this fee is only applicable on transactions above INR 2,000, it would exclude many small- and mid-sized merchants. Given the government's directive to keep UPI transactions free for consumers, the merchants are expected to absorb the additional costs. Apart from a marginal increase in revenue for the mobile wallet companies, the new norms would enable universal acceptance of wallets across UPI QR codes and devices, along with providing parity and transparency."
"The mobile wallet companies can decide to introduce a nominal charge on loading mobile wallets over INR 2,000, which would increase the cost of using UPI transactions. Nonetheless, the new norms and fees can be expected to help mobile wallet providers as they would benefit from increased usability and scope for consumers, which would in turn drive the adoption of mobile wallets," he added.
