UPI Payment Changes: Who Will Pay Extra Charge and Who Won’t?
The National Payments Corporation of India (NPCI) issued a circular on March 24, 2023, stating that a 1.1% interchange fee will be levied on prepaid payment instruments (PPIs) for transactions through UPI. The news led to confusion and speculation about who will have to pay this fee.
Let’s clarify the UPI payment changes and explain who will pay extra charges and who won’t.
What Are PPIs?
Prepaid payment instruments include wallets, smart cards, vouchers, and magnetized chips. Some examples of PPIs are the Paytm wallet, PhonePe wallet, Amazon Pay, and Sodexo vouchers.
Who Will Have to Pay?
The NPCI clarified that the interchange fee would be levied on specified categories of merchants, including online merchants, large merchants, and small merchants, for transactions over Rs 2,000 from April 1.
So, if you are a merchant who accepts payments through PPIs and your transaction value is above Rs 2,000, you will have to pay a 1.1% interchange fee.
Who Won’t Have to Pay?
The NPCI also clarified that there would be no charges for bank account-to-bank account-based UPI payments, which means normal UPI payments.
The interchange charges introduced are only applicable for PPI merchant transactions, and there is no charge to customers. It is further clarified that there are no charges for bank account-to-bank account-based UPI payments, i.e., normal UPI payments.
Free for These People
The NPCI stated that UPI has emerged as the preferred mode of digital payment by offering a free, fast, secure, and seamless experience.
The most preferred method of UPI transactions is linking the bank account in any UPI-enabled app for making payments, which contributes over 99.9% of total UPI transactions. These bank account-to-account transactions continue to remain free for customers and merchants.
Wrapping Up
The UPI payment changes will only affect merchants who accept payments through PPIs and have transaction values above Rs 2,000. Normal UPI payments, which contribute to the majority of UPI transactions, will remain free for customers and merchants.
| Who will pay? | Who won’t pay? | Free for these people |
|---|---|---|
| Merchants accepting payments through PPIs with transaction values above Rs 2,000 | Normal UPI payments, i.e., bank account-to-bank account transactions | Customers and merchants who link their bank accounts in any UPI-enabled app for making payments, which contributes over 99.9% of total UPI transactions |
The NPCI’s clarification has put to rest any confusion or speculation about the UPI payment changes, and now, merchants can make informed decisions about accepting payments through PPIs.
