Exploring the new UPI Payment Charges: Interchange Fees and Their Impact on Your Wallet

The National Payments Corporation of India (NPCI) has announced that certain Unified Payments Interface (UPI) transactions conducted via prepaid instruments, such as digital wallets, will incur an interchange fee of 1.1% for specific merchant payments starting April 1, 2023. This fee will apply only to transactions over Rs 2,000 in designated merchant categories, as stated in an NPCI circular from March 24, 2023. No fees will be charged for transactions up to Rs 2,000. Learn more about updated UPI payment charges below.

UPI charges explained in simple terms

Will you have pay a fee to make UPI payments via wallets? UPI payment charges for P2P customers will remain free

The 1.1% interchange fee will apply to select UPI merchant transactions, including online, large, and small merchants, for transactions exceeding Rs 2,000 beginning April 1, 2023. However, the fee will not apply to peer-to-peer (P2P) or peer-to-peer-merchant (P2PM) transactions between banks and prepaid wallets. P2PM transactions are classified by the NPCI as those involving small businesses with a monthly UPI transaction volume of Rs 50,000 or less.

Will you have pay a fee to make UPI payments via wallets?

The interchange fee is a transaction fee that merchants must pay when a customer completes a transaction. Customers are not required to pay this fee. The amount of the interchange fee will range from 0.5% to 1.1%, depending on the merchant category codes. For instance, fuel, education, agriculture, and utility payments will have a 0.5% fee, while convenience stores and specialty retail outlets will incur a 1.1% fee.

Merchants will bear the cost of the interchange fee, which will not impact smaller shopkeepers, as it is not applicable to them. Medium category shopkeepers will only be affected for transactions above Rs 2,000. However, high-value transactions will be impacted, and it remains to be seen if merchants will pass these higher costs on to customers.

upi payment charges explained

How will this benefit the payment services providers such as Paytm, PhonePe, and Amazon Pay?

Prepaid payment instrument issuers will be required to pay a 0.15% wallet-loading service charge to the remitter bank when a wallet is recharged with over Rs 2,000. Customers will not have to pay any additional fee to recharge their wallets for UPI transactions at this time, but this could change if wallet issuers decide to pass on the 15bps service fee.

UPI transactions to remain free for you, NPCI clarifies

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