As per the latest guidelines, the National Payments Corporation of India (NPCI) has introduced an interchange fee of 1.1 per cent for Prepaid Payment Instruments (PPI) transactions with effect from 1st, April 2023.
This interchange fee will be debited only from the merchant’s bank for UPI transactions above Rs 2000 via PPI (Wallet). However, this is confusing for UPI users who pay the interchange fee.
According to the NPCI, In recent regulatory guidelines, Prepaid Payment Instruments (PPI Wallets) have been allowed to be a part of the interoperable UPI ecosystem.
The interchange charges introduced are applicable only for PPI merchant transactions and there are no charges for customers. And it is also clarified that there are no charges for bank account-to-bank account-based UPI payments.
Who pays the interchange fee in the UPI Transaction?
For transactions above Rs 2000, an interchange fee will be charged by NPCI from merchants for processing UPI transactions through PPI payments.
“In the recent regulatory guidelines, Prepaid Payment Instruments (PPI wallets) have been allowed to be a part of the interoperable UPI ecosystem. NPCI authority says, the interchange charges introduced are applicable only for PPI merchant transactions and there are no charges for the customers. And it is also clarified that there are no charges for bank account-to-bank account-based UPI payments”.
Furthermore, with UPI, customers will have the option of using any bank account, RuPay credit cards and prepaid wallets on UPI-enabled apps.
What is the Interchange fee in UPI transactions?
The interchange fee in UPI (Unified Payments Interface) transactions is the fee to be charged by NPCI from merchants for processing UPI transactions via PPI payment above Rs 2000 from 1st April 2023. Which will be a maximum of Rs 1.1% fee per PPI transaction.
What exactly does NPCI say about interchange fees?
As per the NPCI press release circular (2023), there will be an interchange fee of up to 1.1% for UPI transactions done via Prepaid Payment Instruments (PPI).
This charge will be applicable for transactions above Rs 2,000 and will also be applicable for loading money into the wallet through UPI.
What is PPI payment through UPI?
A PPI payment through UPI refers to a transaction that is done through a wallet, such as PhonePe Wallet, or Paytm Wallet, through a UPI QR code, etc.
For example, if you have money in your PhonePe wallet and want to pay through the merchant’s UPI QR code, an interchange fee of up to 1.1% will be levied on transactions above Rs 2,000.
Will the Merchant pass on this Interchange fee to the customer?
In short, as a UPI user, you may be charged an interchange fee for transacting with merchants. But, officially, you should not be charged any additional fees or charges for UPI transactions via PPI.
However, some merchants may choose to pass on the cost of the fee to the customer by adding a surcharge.
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